With cryptocurrencies à la Bitcoin trending as the newest hot investing commodity, cybersecurity becoming an ever-increasing priority, and asset growth the ultimate goal, it’s not difficult to see why blockchain is turning heads in the financial and banking spaces, making an indelible impression everywhere including healthcare, voting polls, travel, gaming, art, and design.
Blockchain seeks to revolutionize the way we invest and transact, promising, among other things, risk reduction for investors in the sometimes unpredictable, hypersensitive, and volatile virtual currency market.
As is the case with every emergent technology, optimism or skepticism in blockchain’s increasingly critical role in the investing arena may boil down to the pros and cons. Newsmax spoke with several experts in the field to weigh in on some of blockchain’s fundamental benefits and drawbacks.
“What blockchains really are for is grabbing a database, a platform; an Uber, a YouTube, a user interface,” says Shidan Gouran, president and CEO of Global Blockchain Technologies Corp., an investment company that provides investors access to a mixture of stability and growth assets in the blockchain space.
Bitcoin/blockchain-driven tech, according to Gouran, then takes transactional information generated from said platforms and converts it into data, similar to comments in a ledger — essentially another form of information storage. When money changes hands between two parties, the transaction is then recorded to a peer-to-peer computer network, where it and other transactions are encoded and combined to form a block. This block is added to and stored in a string of other blocks that form a chain, marking completion of the transaction.
On the transactional level, it’s this inherent DNA that points to one advantage — namely, that with a distributed network in place, the chain is virtually unbreakable, with no single point of vulnerability, and as such, imparts added user safety.
“One of the greatest benefits of the blockchain storage is that it multiplies information and, thus, makes it almost impossible to disappear. Almost — because there is always some way to hack the system,” says Sergey Uzhegov, deputy CEO of Tugush Blockchain Capital. “In the case of the blockchain technology, the possibility of losing or manipulating information is very low.”
Another security layer that lends credence to blockchain is its anonymity. “One of the key benefits of Bitcoin is that no one will be able to question you about the source of the funds utilized to procure bitcoins,” says Abhishek Shankar, CEO of Majime. According to Shankhar, anonymity doesn’t mean less transparency; since record of each cryptocurrency transaction remains in its respective blockchain, it becomes easy to confirm the number of bitcoins owned by a particular user, plus a summary of all transactions.
Blockchain’s relative lack of a centralized authority is another possible advantage. Traditional transaction verifications involve intermediaries; not so with blockchain-driven actions. “There is no middleman or a person in control who looks after the day-to-day transactions of Bitcoin,” says Shankhar. “Transactions are carried out directly through the network.”
“Having a decentralized blockchain/ledger to implement smart contracts will revolutionize certain industries by taking out the need for having a third party authenticate and verify,” says blockchain adviser Henry Rouquairol. “Rather than having a third party verify a transaction, the whole process will be trustless, so you do not require anyone to be trustworthy.”
Of course, some positives may also translate into negatives at the same time.
“Cryptocurrencies and blockchain are still quite new and nascent in development,” says Cynthia Huang, COO at Altcoin Fantasy. “There's a huge opportunity and potential to get in early on a project that will end up being massively successful. This could be compared to purchasing Amazon stock in 1997; had people purchased a large amount of its stock that early on, they'd never need to worry about money again today.”
But by the same token, Huang notes, “There's a lot of volatility, and there are also a lot of scams in the crypto and blockchain world. You really have to do your due diligence to ensure you understand how to identify a good project from a bad one.”
Gouran of Global Blockchain and Gene Massey, CEO of MediaShares.com, both agree that scalability issues within the blockchain paradigm have been known to produce transaction lag times — not something that people want in this day and age of lightning-fast mobile banking and peer-to-peer sharing.
“The single biggest problem with blockchain that I can see at the moment is the speed of transactions,” says Massey. “When Visa can do at least 10,000 transactions per second, and each blockchain transaction takes several minutes, how can they ever compete? Cryptocurrencies are still in their infancy and they may evolve over time, but their best advantage now is to force traditional companies to make major changes to be competitive.”
Despite the trepidation about crypto’s current abilities, tech leaders interviewed for this article were positive about blockchain’s future. For one, they cite its efficient design, carrying potential for streamlining transaction times and processes.
“Blockchain can potentially overhaul trade finance,” says Ron Shi, head of trading and analysis from Virtuse Exchange. “Verifying finance documents can be time-consuming and risky. Very often, banks have to take on the risk of a trade and audit through stacks of documents to verify the authenticity of the trades.”
Shi believes these efficiencies may enable blockchain tech to create new industry opportunities. “Not only does the technology drive efficiency and reduce cost,” he says, “the blockchain ecosystem also provides a brand-new way for institutions to generate revenue streams.”
Those revenue streams may also end up reaching far and wide, notes Gouran. With blockchain tech, “Any asset can be ‘tokenized,’ making rights to commodities such as precious metals and oil tradeable on a blockchain network, as opposed to less efficient traditional exchange platforms,” he says.
It remains to be seen if crypto and blockchain will require a governing agency for oversight. “The regulatory landscape around cryptocurrency is in constant flux, and it varies greatly between countries,” says Lucas Tesler, COO of Bit Buddy. “It's still unclear how cryptocurrencies will be treated in the eyes of the government down the line.”
Gouran, however, believes that we’ll see at least one or more cryptocurrency or exchange backed by a government entity within a year, to add a layer of legitimacy to the concept.
What about the next five years, 10 years, and beyond? Alexander Tkachenko, founder and CEO of VNX, sees great things on the horizon for blockchain.
“Over the next five to 10 years, the markets will see a step-by-step evolution that will eventually completely change how the markets operate,” he says. “As blockchain matures as a technology and more infrastructure is created, mass adoption will follow, driving massive gains in terms of efficiency, access, and security. The markets will become a lot more transparent and the regulators will have [many] instruments to enforce compliance, which in turn will reduce the amount of bad actors and prevent malicious behavior. This will fuel more interest and readiness to participate from both institutional and main street investors, which will ultimately completely transform the face of financial markets," Tkachenko said.
“I absolutely think that in the next four years, [crypto will] be part of the mainstream,” says Gouran. He predicts cryptocurrencies will be commonly accepted at retail points of sale, that most people will own multiple types of cryptocurrencies themselves, and finally, that it may do away with the need for a centralized banking system.
“It can touch the world in many places, and in a good way,” Gouran adds. “It is the way of the future, in that people will use it and create many currencies. It’s actually possible, through technology, to have many, many currencies representing many, many networks. You can still have the benefit of a centralized system to trade easily and make many different currencies. Computers make you able to do that.”
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