It won’t be wrong to say that Blockchain technology is transforming our world, it is the invisible force which is changing the way business runs. Blockchain has become a buzzword. You might not be able to see it or touch it, but you can feel its impact. We can say that blockchain is the answer to the question: “How can we trust what happens online?”
What is blockchain?
The blockchain is a distributed ledger which has all the transaction stored in chronological order. It is decentralized and is visible to all the people in the network also known as nodes. Thus, making it a highly transparent and trustworthy. It is because of these features that blockchain has become a popular concept underlying the foundation of the modern system.
Well, our perspective of discussion in this blog is how public blockchain secure global assets. I will cover both these points separately.
Let’s begin with digital assets-
When it comes to the prominent applications of the blockchain, then digital asset management is the new entrant in the league. The next question that pops u os how does blockchain play a vital role in this. The answer is that it reduces the need of intermediaries between issuer and consumers. It also decouples the task related to asset management like transaction processing, issuance, establishing users’ identities.
What are digital assets?
There is a recent trend emerging in the market with the name digital assets. To understand blockchain in a better way, you must realize the compact of digital assets.They are a decentralized currency which can be earned and exchanged on the internet. It omits the need for third party or verification. Also, there is no need for an additional fee which is otherwise associated with physical currency.
In this blog we are talking about the use of blockchain for digital assets, it is a platform for digital assets. Bitcoin is the most popular digital assets. Today we are witnessing the use of blockchain in different business niches, and digital assets is one of them
Using the blockchain infrastructure for digital assets can solve various uncertainties which are associated with digital asset management. Some of the problems which can be easily sorted with blockchain include the following :
- No counterfeit
- No intermediaries and ease the transfer process
- No overhead related to transaction processing
What are the challenges with the traditional digital assets?
Fragmented ecosystem – The issuer of the digital asset has a custom process for managing, distributing and tracking the assets.
Poor control of the secondary market – Difficult to identify if the assets are genuine and or counterfeit.
Poor record keeping – This is the most common problem associated with the traditional method, it’s challenging to keep a consistent record of all the practices between the sellers.
Centralized solutions- It can be biased and may result in conflict of interest
The Blockchain technology holds a promising future and immense potential to cut down the problem posed by the traditional system. Blockchain can replace the conventional banking and financial institutions with a peer-to-peer system which works at the backend.
There are two types of blockchain: Public and Private. Although their objective of both is the same, the difference arises in their functionality. Here I will be highlighting them and how they differ.
- Public blockchains – As the name indicates public, it means that the blockchain grant read access and ability to create transactions to all the blockchain users. In simple words, the user can transfer value without the expressed consent of blockchain operators.
- Private blockchains – In case of the private blockchain, the read access is limited to only predefined auditors.
Properties of public blockchains
- They are easy to entry and exit
- In-built precautions
How will public blockchain emerge as a solution to the problems above of traditional digital assets?
I have already mentioned that there are two types of the blockchain, public and private. The security of public blockchain comes from proof-of-work making it almost impossible to fake or reverse transactions. The security of a public blockchain like Bitcoin comes from its proof-of-work, which makes it mathematically impossible to fake or reverse transactions.
To put it simply, public blockchain can simply send and receive a transaction from anybody. Another good point of public blockchain is that every node can audit the transactions thus, making the system transparent and secure. Since each node on public blockchain has as much transmission and receipt power as any other node, they are decentralized and distributed.
Electronic money is one of the categories of the digital asset. Here the asset is a claim to real-world currency. Paypal, Google Wallet, etc. ate centralized electronic money system. This system works password-based authentication which is vulnerable to attack like phishing. Here comes the role of Blockchain-based ledgers. They provide a great alternative to the centralized digital asset management system. It cuts down the need for various tasks which are performed by the centralized system in the following ways :
Transaction processing: Various nodes in the network do this work in a decentralized way.
Securing user’s funds: It is done by third parties using non-custodial and custodial wallets.
Identities of services: It is achieved by building public key infrastructure based on blockchain
Blockchain provides a decentralized digital asset management model which is less demanding for the issuer, services, and the customers.
When we talk about any online transaction or dealings, the primary question that pops up is the security of information. We have seen digital assets use cases in various business verticals like shares, coupons, etc. Merging this with the public blockchain which is a very open and transparent infrastructure, can create a system which highly secure.
I will take a simple example here of exchange of financial securities. If something is decided between the two parties and this transaction or data is stored in public blockchain. This information is visible to all and thus, unalterable. In case of the public blockchain, the time taken for transaction or exchange conformation is lesser than the private one, thus ensuring the exchange of digital asset at a faster pace.
Digital assets on blockchains can prove to be effective in established financial services and on consumer-to-consumer and IoT market. The digital assets can be used in a variety of applications like crowdfunding, peer-to-peer lending, smart property, digital subscription, and event tickets. With the aid of blockchain, it could facilitate the asset management. It could help in reducing cost and expanding the reach of e-money services. To sum, I can say that public blockchains can create a ubiquitous environment for the Internet of Value (IoV), with digital assets being the core of it.