Blockchain databases and what they mean for you

 

Blockchain databases represent the latest technology to fire the collective imaginations in Silicon Valley and tech hubs around the world.

They allow a distributed network of database users to create updates in real time – all without the need for a centralized administrator.

Although the original Blockchain rose to prominence as the technology that made Bitcoin possible, it’s now taking off amongst more conventional financial users, such as banks.

Standard databases, such as those built on top of the popular MySQL technology, are protected from both reading and writing by the general public.

If you call your insurance company, for example, the person at the end of the line updates the company’s database based on the information that you provide.From the security governance perspective, this company is the ‘central authority’ administering the database, and having to relay changes through it naturally slows down the update process.

Distributed Blockchain databases, on the other hand, leverage the power of “the crowd” – the online community as a whole – to make the updating process much faster. This is achieved by creating a large global network made up of a replicating series of nodes that reconcile one another in near real time. Because these nodes all contain the same information, it’s virtually impossible for the entire database to fail, or, just as importantly, be hacked.

The same technology that allowed Bitcoin users near-guaranteed anonymity, while also offering a robust currency independent of any national bank, is now set to transform the E-commerce space.

One of the most promising fields for Blockchain-based firms is smart contracts. These are online agreements where the release of funds is automatically triggered when the necessary conditions are met. They have the potential to eliminate the fraud that can occur when conducting transactions with strangers, and are seen by many as the next stage of the Blockchain revolution.

For years, ‘Blockchain without Bitcoin’ was considered by investors to be a mere pipe dream, but now investment capital has begun to pour into disruptive startups that are proving the ambitious, paradigm-shifting technology is capable of driving broad applications. Haim Toledano and Saar Pilosof are two of the heavy-hitting venture capitalists who have recently backed up-and-coming companies in the sector.

 

“Everyone wants to be able to buy and sell online with total confidence, in terms of the security of their money and their personal information,” explains Toledano. “Now that the technology has finally arrived, we’re about to see an explosion in the overall value of the E-Commerce economy and that’s why the major players of the future will be built on Blockchains.”   

Illustration with word cloud with the word Blockchain.

Security Matters: Improving Customer Safety on Your E-commerce Site

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Will Blockchain Disrupt Trade Finance

 

Will the Rise of Blockchain Disrupt Trade Finance in the Long-term

Despite the emergence and increased sophistication of bitcoin, blockchain remains a largely unheralded and unfamiliar technology. This is because many fail to draw the connection between the two, but in many ways the potential reach and applications of blockchain far outweigh anything associated with its most renowned offshoot.

In fact, blockchain also represents a good fit for online, commercial transactions between businesses, particularly in an environment where companies utilize a third-party trustee to safeguard their interests. Take trade finance, for example, which is likely to host a number of blockchain technologies in the near future and potentially create significant disruption within the sector.

 

Blockchain and Trade Finance: A Marriage Made in Heaven?

In the trade sector, there are a number of parties that would potentially benefit from the security advantages offered by blockchain. There are manufacturers, for example, who have a desire to produce, market and sell their goods to an international audience. We must also consider commercial buyers, whose task is to import global goods in order to sustain their employers’ business. The latter is particularly challenging at present, with UK buyers and those with an active trader account familiar with forex trading having seen the cost of imports increase as the pound has continued to endure a process of devaluation.

Increasing level of risk associated with international trading

With these points in mind, there is an increasing level of risk associated with international trading and trade finance in the modern age. While this risk is usually offset by banks and traditional lenders, who act as trustees in order to safeguard the interests of each party while also assuming the responsibility for reimbursing one or the other in the event that a specific deal collapses. The issue with this is that banks are increasingly all-equipped to perform such a role in the current climate, particularly with a larger number of trades completed through open trading platforms and the increasing pressure of a volatile social, economic and geopolitical climate.

 

In contrast, blockchain has the technological foundations and natural advantages that make it well-placed to address these growing challenges. It instantly negates the need for a central (and potentially vulnerable) ledger, for example, as blockchain is a distributed ledger that enables each party to store their own transaction history and data. Not only this, but blockchain also has a level of transparency and traceability that helps to provide genuine reassurances to parties, in the form of an enduring list of historical transactions that is constantly accessible and capable of providing advanced conflict resolution.

 

Will Banks Adopt Blockchain in the Long-term?

 Of course, the issue that remains in the question of accountability, as an independent technology source as blockchain would not be able to reimburse parties in instances when international goods are not delivered (as an example). The sensible solution would therefore be for banks to integrate blockchain technology into their existing software, primarily by acting as platform suppliers that external clients and counter-parties can connect to. This would help banks to improve their market share over time, rather than threatening the traditional status quo and placing their status as central ledgers at risk.

This will cause some considerable disruption in the short-term, of course, as banks get to grips with blockchain technology and look at adapt to a brave, new world. These challenges would surely ease over time, however, while enabling both lenders and blockchain to achieve their true potential in the commercial marketplace.

Marcus Turner Jones

 

 

 

 

 

 

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