Over the last few years, the use of blockchain technology has exploded. Everyone is, in one way or another, targeting to use the blockchain or a derivative product. At the height of COVID-19 pandemic, banks became very rigid and were declining loans to borrowers, arguing they were risky parties. Crypto loans became the new option for many, and all that one needed was a valuable digital coin.
Now, it is not just the crypto loans, blockchain and affiliated marketplaces are offering almost all the services offered by financial organizations. This leaves these organizations with little or no alternative but to embrace blockchain technology, and some have already started. Keep reading as we demonstrate key risks and benefits of using blockchain technology.
What Exactly is Blockchain Technology?
Blockchain is a public ledger that permanently stores information added to it. It is also decentralized, which means it does not have a central authority that controls or governs it and does not have a specific owner. Instead, it belongs to the people who hold the native currencies in its network. The coin holders are also responsible for its governance. So, if you have some ETH, you are eligible to vote when a major decision is being made. For example, the nodes spread in the Ethereum network agreed that it was okay to change from the limiting proof of work (PoW) protocol to the high potential proof of stake (PoS) consensus mechanism.
To use a blockchain, such as Ethereum or Bitcoin, the payment for transactions has to be done using native coins. These are cryptocurrencies such as BTC for Bitcoin, ETH for Ethereum and ADA for Cardano.
What is the Risk of Being Left Out?
The real danger of not adopting blockchain technology is that your system is likely to be overshadowed rather fast. This means although you might have been a giant organization, such as a bank in the past, there is a risk of getting relegated. Here are other risks of not using blockchain and cryptos:
- You are limited on the number of services that you can offer.
- The transaction costs for most financial services, especially when sending money abroad, are high.
- Younger people are willing to experiment with new technology. Therefore, failing to sync with them could result in losing a big chunk of the targeted markets.
- The traditional financial services make it impossible to reach a big part of the unbanked. Leaving out potential market segments is not a good idea. But you can access it through blockchain and cryptocurrencies.
Blockchain Comes With the Following Benefits
The primary benefit of adopting blockchain and cryptocurrencies is being able to cut down the cost of transactions. However, there is a lot more to expect:
- There is greater accountability because the data for every transaction is permanent after addition to the blockchain.
- Digital currencies allow you to reach more people, especially those who are based abroad.
- You can take advantage of smart contracts to make agreements with clients and different stakeholders more binding.
- There are many services, such as staking and crypto lending, that you can adopt to grow revenue for your enterprise.
As technology races to the next level, your company should not be left behind. The good thing is that you do not have to start from scratch when considering blockchain technology. Instead, you can take advantage of the already developed blockchains and create applications that can work embedded on them to achieve all the benefits we have listed above, plus a lot more. Talk to Hi today to learn more about the best strategies for joining and taking advantage of blockchain technology.