We live in a time where innovation flourishes, especially since the appearance of the internet. What is exciting about nowadays is the new paradigm shift regarding the way data and value are exchanged. In order to obtain funding for a project, instead of finding investors and preparing a pitch for them, like you would have done in the old days, now you have to convince people on the internet to invest in your idea.
How can this be achieved?
All of this is possible through the help of blockchain technology. This term was first introduced when Bitcoin, or The Internet of Money, became a name on the market.
Bitcoin has revolutionized the finance world being the first decentralized digital currency, and proving that there is a better way to trade and save money. It uses peer-to-peer protocol that allows online payments to be sent directly from one party to another without going through a financial institution, or centralized administrative system. The novelty Bitcoin came with was blockchain technology, keeping investments secure and safe.
Blockchain: how does it work?
Put simply, blockchain is a decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. All online activities are organized into chunks of data named blocks, which are linked to one another forming a block chain. Through the use of miners that monitor, verify and record the transactions, every party involved in that business network can witness and access their log of transactions.
The concept emerged as a reaction against centralized ledgers, which require for an authority to keeps track of your financial activity (balance).
To better exemplify this, think of a business you want to start. This involves covering a landscape of financial, legal and regulatory practices. It would also require you to rely on intermediaries from government officials or lawyers to accountants. All of these steps add time and cost to your startup, factors which can destabilize your project, forcing you to put everything on hold or terminate it.
With this approach, besides losing money and time, there is a high chance for errors to occur. Consider international transactions and the steps involved: you make an international payment, you wait, your money goes to a bank, then another, and they would have to manually write the entries, store copies of the ledgers, and so on. So, you begin to have doubts, and wonder how trustworthy this process really is. It doesn’t sound like the best option, because mistakes could easily happen.
Why trust in blockchain technology?
Fortunately, blockchain has found a way to bypass the tedious procedures previously described, allowing for profit to be transmitted cheaper, safer and faster.
The Nomad Community is an example of the successful integration of this innovative technology. They use an updated version of the blockchain application – Ethereum. They incorporate: “a decentralized digital public record of transactions that are secure, anonymous, tamper proof and unchangeable”. – CEO of Nomad Community
As with The Nomad Community example, blockchain has great advantages like: transparency, safety and trust.
Transparency: As a company grows and the number of transactions increases, work load rises. Through a distributed online ledger, all transactions are done on the blockchain and they are transparent. Basically, each transaction is put on a block that is connected to the one before and the one after. As each block is added to the next, together they create an irreversible chain, showing every event from beginning to end with exceptional security and transparency.
Safety: All financial activities are monitored and collected through the use of miners – Computers around the world ‘mine’ for crypto coins (digital coins) by competing with each other. Miners use special software to solve math problems to achieve consensus in order to approve transactions. Therefore, all online activities are mathematically proven and valid.
Trust: Blockchain incorporates a system for electronic transactions without relying on trust. It allows multiple parties to collaborate without confiding in one another. Also, it allows for a contract to be executed by the blockchain. For example, the share of revenue gets automatically distributed to each party, without having to directly trust other members involved.
As we give in to the digital age, unimagined, new and powerful digital relationships are possible through the help of blockchain technology. It has proven to be better, safer and more accessible, stimulating entrepreneurs all over the world to dare to start their own business.