Blockchain is a ledger of decentralized data that facilitates recording business transactions and tracking assets in a business network. It is a distributed ledger that records the provenance of digital assets that makes the history of any digital asset transactions unalterable, boosting the transparency in cashless transactions (World Economic Forum, 2021). This allows real-time access and transparency to immutable asset records and helps reduce transaction risks. Blockchain technology is growing exponentially and gaining popularity because keeping records and data regarding business transactions is a crucial part of business, and blockchain technology enhances the safe recording and storage of business transactions in multiple industries such as finance, manufacturing, and supply chains. Thus, blockchain is developing rapidly and holds the key to a secure and efficient cashless future.
Development of Blockchain
Blockchain technologies have penetrated the mainstream computer applications, changing the implementation of internet transactions by ascertaining trust between the unknown transacting parties. In addition to establishing trust between transacting parties, blockchain technologies will likely develop and gain more usage because of their lower cost and greater transaction speeds. The innovation can potentially reduce the monopolistic power of established transaction intermediaries like banks and other centralized industries. Also, blockchain is developing as a disruptive technology because it enables the transitioning of the roles of the internet from communication to transaction. It has created an Internet of Value from the traditional internet of communication and information (World Economic Forum, 2021). With the advantage of increased trust between strange partners, blockchain technologies are bound to cause additional changes through the creation of new players to exploit the decentralized networks of blockchain-based platforms (Stokes, 2021). For instance, the release of the Ethereum platform in 2015 enabled the issuance of smart contracts. However, the most significant development of blockchain technology is increased government implementation. Governments have discovered that blockchain technology is not limited to cryptocurrencies like Bitcoin. Currently, governments are experimenting with the technology to enhance secure transactions and data transfer in key areas such as land registration, safeguarding healthcare records, securing procurements and contracts, and identity management. For instance, Estonia, the USA, and Georgia governments are experimenting with blockchain technologies in healthcare and land registry. Future developments in blockchain technology may include expanding smart contracts to check whether contract conditions have been met using blockchain nodes (World Economic Forum, 2021). This will enable nodes in the blockchain to execute contracts. Therefore, being a relatively new technology and tradecraft in practice, blockchain technology is quickly developing to provide efficiency, security, and privacy in ledger-based transactions.
Role of Blockchain Technologies in Cashless Transactions
Blockchain technologies create virtual currencies that have increased since the discovery of Bitcoin. The increase in cryptocurrencies has improved the convenience of making cashless transactions anonymously. Blockchain technology played a key role in introducing virtual currencies. With the increasing popularity of virtual currencies, coins and paper notes could be eventually displaced, leading to cashless transactions. The transition from conventional physical currencies to controversial virtual currencies is gaining footprints in major developed economies such as the US, Canada, and Sweden. For instance, many modern organizations are increasingly accepting and embracing digital currencies over conventional cash-based transactions. To illustrate, Microsoft and Expedia joined the increasing number of organizations that would accept Bitcoin as payment. In addition to corporations, various industries are starting to embrace virtual currencies. For instance, states like Florida and Arizona have amended laws to permit blockchain, which records virtual currencies to be used in transferring and recording real estate property deals (Calvin et al., 2020). Therefore, blockchain technology plays a key role in transitioning to cashless transactions by acting as the encrypted digital ledger on which transactions based on digital currencies can be recorded. Also, by spreading its operations across computers, blockchain enables cashless transactions using virtual currencies to operate without the necessity for a central authority such as banks, reducing transaction risks and eliminating many transaction fees and processing.
Potential Risks Surrounding the Use of Blockchain and Cashless Transactions
Blockchain and virtual currencies have their unique vulnerabilities that can create specific risks like technology risks, government control risks, and operational risks (World Economic Forum, 2021). Technology risks may include integration-related risks such as integration and compatibility issues with critical legacy systems used within an organization. Additionally, unrested codes can present damaging and long-lasting cybersecurity risks when released to the public. Developers can be motivated and incentivized to be the first players to release these applications at the risk of distributing inadequately tested codes. Given the irreversibility of blockchain technology and the decentralization of blockchain solutions, such risks can create great damage. Financial risks related to blockchain and distributed ledger technologies include value transfer risks and smart contract risks. Value transfer risks arise because blockchain enables transacting parties to complete the transaction processes without an intermediary. This transaction model exposes the transacting parties to the risks traditionally managed by central intermediaries such as banks. Contrarily, smart contract risks stem from the irrevocability of blockchain transactions. For instance, bugs and exploitable flaws in the contracts can introduce risks to the systems, degrading the system’s performance (Calvin et al., 2020). Finally, additional risks if cryptocurrencies replace cash-based transactions include risks of an unregulated economy since governments may not have control over the amount of currency to print, implying that fiscal, economic control measures will be limited if not eliminated since virtual currencies operate with much less government purview.
In conclusion, I agree with the two articles in the assertion that distributed ledger technology could transform capital markets given its decentralized data platform, information immutability, and record transparency. Blockchain is gaining popularity and usage in core government areas handling sensitive data like healthcare and finance. With the current pace, blockchain technologies can create a disruptive force beyond government control to break up big technologies, leading to major transformations in core sectors.
References
Clavin, J., Duan, S., Zhang, H., Janeja, V. P., Joshi, K. P., Yesha, Y., … & Li, J. D. (2020). Blockchains for government: use cases and challenges. Digital Government: Research and Practice, 1(3), 1-21.
Stokes, J. (2021). How the blochchain technology will break up Big Tech: the Big Tech trust-bursting conversation has a shelf-life. Retrieved from: https://www.jonstokes.com/p/how-the-blockchain-will-break-up?s=r
World Economic Forum. (2021). Digital Assets, Distributed Ledger Technology and the Future of Capital Markets. Retrieved from: https://www3.weforum.org/docs/WEF_Digital_Assets_Distributed_Ledger_Technology_2021.pdf
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