May 22, 2010 was the day which brought revolution in the means of financial transactions and became a trend-setter. Surprisingly, it has nothing to do with secured debt obligations or stocks.
A girl from Jacksonville, Florida, US, purchased two pizzas from Papa John’s using 10,000 units of ‘Bitcoin’- a newborn currency, without any taxes or fees. Buying those “Pepperoni Pizzas” was the first ever bitcoin transaction, the cost of which now exceeds $4 million. For the marketers and programmers, this situation was strange and surreal. Hence, the financial world came up with the public ledger of all the bitcoin transactions that will be executed ever — Blockchain.
Blockchain: the support system for Bitcoins
Initially, blockchain received infamy for turning out to be the support system for bitcoin: the web-based cryptocurrenncy. But lately, with the help of distributed networks of computer users, the transaction records were recorded and made secured at the lightning speed. Blockchain potentially circumvented the need for correspondent banking and other intermediaries like international money transfers. For those who had deficit entry into basic financial services the accessibility and scalability of blockchain simplified their way to the global economy. The biggest strength of blockchain is that it gives verified record of every online transaction, which will be made ever; further decreasing the risks of individuals, corporations and banks-, which will never be defaulter.
Process And Applications Of Blockchain
Blockchain can be used as payment protection, allowance system, bank accounts by distributed ledger or smart contract, which provides an alternate financial scheme and financial inclusion to billions of ‘unbanked’ people around the world. The concurrence of mobile money and digital finance has led to the popularity of concepts like M-Pesa (including many other like this) to help more than 400 million people living in cash based eco systems. According to GSMA, these people now have formal financial service.
Future Prospects of Blockchain
Lately, even the significant headway made by the providers in the areas where banking services were untouched, more than two billion potential financial services customers remain stranded. Geographically, fragmented industries have mobile money providers who have yet not discovered the clear path to achieve the significant scale required to realise network effect for long-term viability.
Blockchain can shield these efforts by becoming a support system to open the closed- loop mobile services. Currently, some payment services only work between two parties (if they both have accounts). Likewise, customers are not allowed to pay each other on separate mobile network easily. But the blockchain can expand interoperability to link these fragmented closed loop services both domestically and internationally. Now with an in-depth understanding of interoperability value proposition and ability of blockchain to significantly improve the cost structures of inefficient cross-border payments, the financial institutions have to accept the stark reality that disruptive blockchain technology is efficacious to serve unbanked masses. This fact serves the next few billion participants of global economy.
Blockchain technology in concomitance with smartphones will endow an infrastructure that will hugely reduce the cost of operations supporting new business models; with an aim of sustainably serving the poor. It all started with buying pizza using bitcoin and has grown up to the phase where big companies are dealing with bitcoins. Microsoft added bitcoin as a payment option for variety of digital content across its online platform. In addition, Dell announced accepting bitcoin through partnership with Coinbase. Other than them, the companies who accepted bitcoins were Overstock, Newegg, Showroomprive, Tigerdirect etc. With evolution of internet money, humans need to be blockchain-savvy remembering the fact that all great things are preceded by chaos.
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