The Current Economic Infrastructure Isn’t Vital to Adopt Bitcoin and Blockchain.
To keep up with all the data, the level of service and technological advancement has rapidly increased. For example, you can use bitcoinmillionaire-pro.com to maintain complete control over your funds while trading in bitcoin. However, when considering all this complexity, it is wise to look closely at what we currently use for our infrastructure and if users can improve it.
While blockchain technology in cryptocurrencies like Bitcoin provides many benefits that could improve how supply chains are run, the current infrastructure is not as strong to adopt blockchain technology into their system. Therefore, there needs to be some work done on developing scalability and improving the efficiency of these systems with cryptocurrency.
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Traditional finance, for example, is used as a backbone of the supply chain, and a lot of trust is placed in its infrastructure. By looking at the lower echelons of these systems and what they are using first, we can see the weak points in their current model and how users could implement blockchain technology to strengthen these areas.
Issues with Traditional Finance:
The backbone of many supply chain relationships is the clearing and settlement process. This process in finance works by taking all transactions from multiple financial institutions through their system until a final settlement occurs on the books of a single financial institution such as JP Morgan Chase or HSBC. The problem with this system is that it takes too long to settle for most companies.
A company that is making products wants to have the money for those products within 24 hours for the most part. Unfortunately, the time it takes to settle can be even longer depending on how much money is in the transaction and how many banks are involved. As a result, it can hinder cash flow and negatively impact companies and their supply chain relationships.
We also have a problem with fraud, as many banking transactions are still done manually, leaving ample room for manipulation. Current systems also lack effective auditing, which means it’s too easy to manipulate those transactions without being caught.
Why Can Companies Not Implement Bitcoin and Blockchain Ecosystems?
Users can achieve quicker payment and cash flow by using cryptocurrencies like Bitcoin. It is a decentralized system that is not controlled by any one institution, which means the speed and transaction of money can be faster than traditional finance. It is not to say that current systems are slow; it’s just that Bitcoin’s blockchain network can process more transactions in less time as compared to the current financial infrastructure.
But Why Does Cryptocurrency Require Blockchain or Have an Underlying Technology?
The underlying problem for cryptocurrency has always been trusting and transparency in the system. Bitcoin was the first cryptocurrency that gained stability and trust amongst traders and investors due to its features such as decentralization, anonymity, and scarcity. However, like everything in the world that has value, it will always be vulnerable to hackers, fraudsters, and misdeeds by individuals. Scalability is one of the prominent issues why blockchain and bitcoin are not adapted according to the benefits they can offer to businesses. Issues with blockchain technology:
Blockchain technology is a public ledger that has all the transactions and records that have been made in the system in an unchangeable way. It makes this system very secure, as the user can manipulate no one or entity into changing or modifying any records or transactions within the ledger.
So How Could the Current Finance Infrastructure use Blockchain?
Banks and financial institutions can start to implement Bitcoin’s blockchain network into their systems, specifically their clearing and settlement process, to utilize its benefits, such as faster transactions between banks in the real-time and more efficient control of funds. In addition, they should be able to trace the use of funds from any point in the transaction and not rely only on manual audits.
Companies in the supply chain could also benefit from using cryptocurrency for payments outside their supply chain relationships. It is because right now, many supplies are purchased on credit or through suppliers who absorb a lot of the risk that goes along with this type of supply chain interaction. While companies do not want to get rid of their suppliers or relationships, they typically want that risk to be lower and they want the business relationship between them and their suppliers so they can flow more easily with meeting their needs effectively.
Korea’s government is looking into integrating bitcoin and blockchain technology into the country’s financial infrastructure. They are fully aware of the benefits that can be gained from it and are willing to work with other companies to make this happen. South Korea is already a leading center for a cryptocurrency exchange in Asia, so it would not be surprising if this were to become a reality.
There needs to be more from both the private and public sectors of business and governments to utilize this technology in their systems and improve their processes. A lot of infrastructure in these areas has not been updated in a long time, and we have seen some advances, but we need many more to fully realize blockchain technology’s potential benefits.