How Blockchain is Revamping The Future of The Payment Industry?
By Steve Johnson
Blockchain technology-enabled applications are popular amongst all industry verticals. Blockchain applications are mostly used for swift transaction recording, fetching, and settlement. Recording online transactions is one of the most crucial, yet time-taking tasks. When done manually by employees on spreadsheets, these records are highly prone to human errors. Making even a single error in transaction records can freeze the whole system and have extensive implications. These human errors can be eliminated by implementing blockchain technology’s synchronization mechanism and encryption features. As all blocks are linked chronologically, it is easy to trace the origin of a specious online transaction. This makes the system more reliable and free from errors.
A blockchain-based distributed ledger system ensures greater transparency and accountability. Based on the add-only structure, Blockchain facilitates the addition of transactions and data to the chain but blocks the alteration or removal of any current transaction in the chain. This facilitates the tracing of transactions up to the first block where the transactions originated.
Another major benefit of integrating blockchain technology into your payment system is that it eases and accelerates the speed of transaction settlements. It’s because of all these advantages that blockchain technology is going to shape the future of the payment industry in a great way.
As the ongoing COVID-19 pandemic has acted as a catalyst for the long-term adoption of Blockchain-based payment systems, it is high time that traditional, centralized payment systems should consider approaching a Blockchain web development company for effective and highly-secure Blockchain web solutions or portals.
Major Reasons to Adopt Blockchain-based Payment Systems
Integrating Blockchain technology into your payment infrastructure makes it more
Tamper and hack-proof, and
This is why a decentralized architecture-based payment platform is virtually secure from hackers and safer than payment portals developed on centralized infrastructures.
Impacts of Blockchain Technology on Transactions
Here are some of the ways how blockchain technology will make online transactions faster, efficient, and immutable, thus bringing new opportunities for Blockchain application development agencies.
Enhanced Transparency and Data Security
Blockchain technology will dramatically change the way businesses and companies store data. As said earlier, manual record-keeping is a tedious, error-prone, and disaster-prone task, Blockchains being virtual distributed ledgers are free from all these drawbacks. Blockchain technology makes transactions immutable, encrypted and stored in an organized way. They are easily accessible to all nodes; however, they cannot be modified.
No Intermediaries Involved
Blockchain transactions do not involve any third-party intermediaries. These transactions are authenticated by miners who work 24x7 doing all the computations. Once these computations are completed, the transaction is then verified and appended to the open-source, distributed ledger. This eliminates the need for lengthy, complex documentation or heavy verification fees. There is a small reward for miners and therefore, parties involved in a transaction do not feel it as a burden. Removal of third-party intermediaries significantly reduces transaction rates and boosts up the process.
Increased Efficiency in Transaction Settlements
Earlier, the transaction settlement process was delayed for days, weeks, or even months. With blockchain technology, transaction settlements are done instantly which is its greatest benefit. Since the technology eliminates intermediaries and verifies transactions based on the logic, there is less human involvement which speeds up the settlement process.
Shortcomings of Adopting Blockchain Technology in Transactions
There are always two sides to a story! Although blockchain technology offers significant benefits, it also comes with certain drawbacks. As the technology is still in its development phase, there will be continuous, natural, and much-needed evolution.
Private Blockchains overshadow the principles of decentralization and anonymity. Many private organizations and banks have created their private Blockchains which enables them to control the private keys and the right to admission. Although this technique ensures high-end transaction security, the main intent of using a decentralized ledger system is defeated.
Hefty Operational Costs
It costs about $600 million to maintain the Bitcoin ledger. This cost increases as the Blockchain size increases. In addition to this, you also need to consider the operational and set-up costs of mining rigs. When more miners are involved in a system, the competition gets tougher. Hence, there is no reward guarantee despite paying a large amount for taking part in the system.
Furthermore, each node in the chain works round-the-clock to stay ahead in the race to verify transactions. This results in higher power consumption. If you consider the total cost of power consumption and labor, adopting blockchain technology-based solutions may be considered a financial liability for organizations.
Other than the operational cost, the Blockchain application development also involves additional cost. Since Blockchain technology is still new in the payment industry, the cost of developing a blockchain application.
Lack of Blockchain Knowledge and Coordination
Another hurdle that comes in the way of the adoption of Blockchain technology is a lack of understanding about how this technology works. Other than the banking and finance industry, Blockchain is still a mystery for many other industry folks. Lack of knowledge keeps them from discovering new use cases for their own payments.
To bring out the best from Blockchain technology, there should be good coordination between companies and industries. However, this is not the reality. Firms are creating their private Blockchains to meet the needs of their own systems.
No Role of a Regulatory Body
While Blockchain decentralization is a significant advantage, the presence of an effective regulatory body is crucial for exercising oversight. As there are no strict regulations, there can be a potential impact of any negative or fraudulent activities in a Blockchain that can directly affect participants and the entire transaction record. The presence of a regulatory body is essential for monitoring and regulating the cost and size of Blockchains.
The urge of moving to a cashless society by governments worldwide and the outbreak of the COVID-19 pandemic have compelled people to use digital wallets and payment portals because of their simplicity, augmented efficiency, and quick operations. The increased use of digital payment solutions and platforms has also given rise to data breaches and hacks. Therefore, it is advisable that all traditional payment systems should switch to Blockchain-based payment systems to ensure higher levels of efficiency, privacy, and security.