In the age of deception and corruption, the real truth becomes a value that is earned hard. Even before the DLT revolution took place, a client always had to trust the centralized entity. The decades-long history of security breaches and privacy scandals in financial and other fields told us not only that the users blindly trust their data privacy and security to the hands of a single institution, but also do not have a viable alternative at their choice. This issue had led to the fact that the trust had been exploited multiple times by the centralized infrastructure providers, resulting in more than adverse outcomes. The blockchain technology has many lucrative features to be praised. However, yet unseen level of trust is one of the major pros for this technology choice.
Why do we need DLT?
The core value of blockchain technology lies in its ability to replace intermediaries — this technology can reduce the parties’ overhead in direct asset trading or quickly confirm ownership or authorship of specific information, the latter is now almost impossible to do without the involvement of a central governing body or an impartial third party. Moreover, the well-known feature of the DLT to provide authenticity of the content, regardless of institutional boundaries, will force the parties to relate to the veracity of records, content, and transactions differently.
The financial services industry plays an important role as a formal institutional infrastructure in the areas of payments and money transfers, issuing and trading in securities, ownership, and trading of financial instruments. Therefore, it is not surprising that it is financial sector organizations that make aggressive investments in blockchain technologies and experiments.
The distributed ledger technology wins the arms race
There have always been major issues associated with centralized systems: a single point of failure, which resulted in hackings either due to specific malware usage or the human factor (bribery for the top brand executives is just a top of the list). Hundreds of millions of user data had been sold to various shady companies and third parties as a result. The biggest effect of user data monetization has been to energize even more companies to bait you for your clicks, likes, poll responses, IQ tests, real-time location , nd much more, exploiting that data for different malicious purposes.
The main task for the blockchain in any information system is to ensure trust in an environment that excludes such trust by default. Proof-of-Work or Proof-of-Stake algorithms had reduced these challenges greatly. The infamous 51% attack, which can disrupt the blockchain in theory, can only be performed in case of enormous available computing capacity — which will result in an insane amount of money. The price tag required to perform this attack is sky-high and comes close to staggering billions of dollars. That means that any worth of transaction below this grade is utterly safe as it just isn’t viable to hack it! That goes for quantifying trust with the blockchain.
Modern banks do not have efficient systems to evaluate and track the trustworthiness of the third party at a proper accuracy degree. Blockchain tech is the first attempt in the world to provide a single person with the option to calculate the trust of the system at large. The major crisis history had told us that none of the systems of calculations existing right now could address and eliminate this issue. Still, the blockchain enables us to calculate counterparty risks effectively.
The forthcoming challenges of the new age have a solution
Trust is the very foundation of a business. In the realities of the global economy, which every day, more and more efforts and ventures go into digital space, it requires a lot of money, time, and is often ineffective. Now various organizations are studying how blockchain can become a real alternative to modern process, organizational, and technological infrastructures that provide institutional trust. Just as the Internet has reorganized communication standards, the blockchain can change the usual principles in conducting transactions, concluding contracts, and building trust, in fact transforming everything that is the basis for the functioning of business, government, and society.
The blockchain replaces obsolete and restrictive methods of doing business — “obstacles” that inhibit international trade — thanks to a reliable distributed registry protected by the latest encryption and data verification technologies. An authorized network of participants protects the integrity of the record, and each side can only see the information that it has access to as part of the transaction.
True trust arises when numerous independent participants keep their own copies of important information. And distributed blockchain systems do just that. There is no need for a single process management body, be it a centralized authority or a large bank.
No additional systems of deposit hedging will be needed nor any regulators bodies when the effective blockchain-based system will be working in full. Only parties involved in a transaction can see information and make changes. All transaction data is always stored in the registry, which means that no one can rewrite or deny history.
Imagine, for example, the benefits of a distributed ledger technology in the global payment market or how a safe, transparent transactional infrastructure can help developing countries reduce the estimated trillions of dollars in annual losses from corruption, theft, and tax evasion.
Meanwhile, venture entrepreneurs have already roughly estimated about $ 1 billion dollars in 100+ blockchain startups. According to the information provided by GP Bullhound, global VC companies invested 447 million U.S. dollars in North American companies in 2017. Investors are well aware that the blockchain ecosystem can be combined with various technological tools and has many options for use — from making payments and creating digital wallets to cryptocurrency exchanges and all kinds of blockchain platforms. In 2019, the global spending on blockchain solutions is projected to reach about 2.7 billion U.S. dollars!
Also, blockchain consortia are on the way of the formation being formed. For example, R3 CEV has joined forces of more than 40 of the largest banks to create a distributed registry platform to help the financial sector master the blockchain. IBM, Cisco, Intel, the Linux Foundation, and many others, have created the standardized, open blockchain platform Open Ledger Project to accelerate the implementation and development of blockchain-based technologies and services.
In other words, the blockchain eliminates the possibility of fraud, as the risk is minimized in a system in which control is essentially distributed among participants. This is the perfect definition of trust. Blockchain can’t be a one-cure-for-all: crypto exchanges hacks are often making screaming headlines due to astronomic amounts of stolen funds. However, the technology had only passed its first decade of development milestone and is still in the maturing phase. As the solutions will become more sophisticated, and the market vector will shift into the development of project development instead of focusing on digital assets market play.