Blockchain-based financial systems have the potential to change and decentralize economic activity. This new financial approach would give firms that are using it an edge over their competitors who are yet to tap into it. Also, financial technology based on blockchain provides access to financial services to everyone regardless of location and status, which makes it easier and convenient for business operation.
Firms should consider transitioning from traditional finance to blockchain-based finance, as the financial technology strategy would shape a modern world of decentralized finance. This new way of doing business would be characterized by global accessibility to financial service without limits; lower transaction cost and enables safer transactions.
It presents to firms different benefits that can help bolster business growth through its decentralized nature.
However, companies should consider transitioning from traditional finance system to blockchain-based finance for the following reasons:
- Decentralization: Decentralization of data reduces the risk that the centralized systems are prone to due to its functionality as there is no centralized authority that controls blockchain. Decentralization reduces the risk by sharing the data within more than one unit with a close connection to the implementation of blockchain. However, the blocks constructed from the data are encrypted and linked together, which makes sharing digital information more secure. It is extremely important to firms, as it helps to strengthen the client’s trust.
- Tracing: With blockchain ledger, once an exchange of goods is recorded, it is easy to trace all the history of the transaction. This attribute is salient in improving security, preventing fraud in exchange-related transactions and verifying the authenticity of the traded assets. In a firm that deals with manufacturing and distributing, it can be used to track the supply chain.
- Security: Blockchain security protocol is more enhanced and secured than other record keeping. With this technology, each record is encrypted and linked to previous records. This immutable and high-principled nature of blockchain ensures safe transactions and minimizes the chance of fraud in doing business.
- Transparency: Blockchain’s greatest feature is its distributed ledger which allows all participants who have access to connect to share the same documentation. To firms, this adds an unparalleled layer of accountability.
- Increased Efficiency: With blockchain, trading can be completed faster and more efficiently because the technology removes the middlemen and reduces the time for carrying out businesses. This is a huge plus for companies because everyone has access to the same information. Thus, it makes it easier to trust each other without the need for numerous mediators. It also reduces mistakes made by humans which affect the traditional process.
- Cost Reduction: With a blockchain-based system, companies only need data blockchain with little documentation to complete a transaction. Because it is permissionless, this means that anybody in the world can access it. Hence, this helps to minimize the cost of running a business.
Finally, the decentralized, tamper-proof, high-performance, immutable nature of blockchain makes it a perfect instrument for minimizing costs, streamlining payment, security issuance, asset trading, clearing and settlement. With these unique features, a blockchain-based finance system is an exceptional tool for business growth.
Calistus Anikwe is a seasoned cryptocurrency and blockchain writer with over four years’ experience. He loves creating content that drives business. When he is not writing, Calistus spends his time singing and reading.