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Sunday, November 5, 2017

Blockchain News: Why Blockchain Can Be Good For Competition

Why Blockchain Can Be Good For Competition

In the endless debate about when do you actually need a blockchain within a specific industry vertical versus not, it is easy to lose sight of the big picture.

Proponents of permissioned, distributed ledgers are often quick to point out the shortcomings of permissionless protocols such as Bitcoin or Ethereum. Because of their decentralized nature, they do not fit within existing regulatory frameworks, are difficult to monitor and control, and introduce new trade-offs in terms of speed, flexibility and energy consumption into what could otherwise be a seamless process of transaction reconciliation across organizations. Private blockchains, they say, can deliver all the benefits of this new, exciting wave of technological change without disrupting how businesses run their operations.

The catch is that permissioned blockchains take advantage of only one of the two, key costs affected by blockchain technology: the cost of verification. In and of itself, being able to cheaply verify the attributes of a specific transaction (e.g. who is involved, their credentials, etc.) without incurring additional costs or performing an extensive audit can be extremely valuable to society. For markets to thrive, buyers and sellers need to be able to trust the information they use to decide when and with whom to transact. Whenever the asymmetry of information between buyers and sellers is too large, markets unravel, and beneficial trades do not take place. Blockchain technology, by lowering the cost of verification, can make markets more secure and efficient, and expand the types of transactions we are willing to engage in.

Many of the systems used today across the globe to settle and reconcile transfers of value and digital assets could theoretically be made more efficient with a distributed ledger. Of course, for verification costs to actually drop, the data recorded on a blockchain needs to be accurate to begin with. While this is easy to achieve when all the information needed is generated and updated digitally (as in Bitcoin), when a distributed ledger is used to track offline events, the question of how to port such analog information back into the digital space is an unresolved one. This “last mile” problem constitutes a sizable entrepreneurial opportunity for startups and incumbents that realize that blockchain does not necessarily remove the need for intermediaries, but instead changes the nature of intermediation. Third-parties can still add substantial value to marketplaces (e.g. through curation), but a revenue model simply based on processing transactions is unlikely to be sustainable in the long run.


Full story at http://bit.ly/2iwwK3n


Source: Forbes


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