The year 2021 was transformational for the world of finance. Fintech innovations are shaping the way people as well as businesses, send and receive money across the globe. But it was the dramatic evolution of digital currencies coupled with the accelerated adoption of blockchain technology that turned out to be a real game-changer for the future of money. Entering 2022, the global cryptocurrency market is now worth more than $3 trillion, surpassing the predicted numbers to prove that these revolutionary technological ‘trends’ are here for the long haul.

While governments, investors, and businesses are steadily recognizing the power of crypto and blockchain technology, we believe it is important to understand these unfamiliar terrains before attempting to navigate them.

Blockchain Technology: A powerful tool for digital transformation?

The underlying technology powering Bitcoin, Ethereum, and other such cryptocurrencies, blockchain, is more than just a mechanism to ensure a secure transfer of digital currencies. Blockchain technology is a digitally distributed, decentralized ledger system that promotes inclusion, data integrity, and transparency. This trailblazing technology is predicted to play a defining role in boosting digital transformation for businesses across the globe. While commonly known for its role in redefining the finance industry, blockchain technology has many far-reaching applications across industries.

From enhancing logistics and supply chains to automating business processes to identity management, the possibilities and potential are truly endless. Data provenance, which is recording the history of data, is the top use case for blockchain, and is set to bring an estimated $962 billion boost to the global GDP by 2030. The decentralized nature of blockchain ensures agility, transparency, and security for businesses and its customers. This is especially critical in a world that is rapidly becoming digital, and data driven.

While blockchain application is on the rise, there still seems to be conflicting views within organizations about its mainstream adoption. As with every technology, blockchain also has its own challenges. While the cost of operations is relatively low, the implementation cost for some blockchains is high. This may alienate small business owners and create a sense of inequality. That said, business leaders should also be wary of investing in a technology they may not need!

Even with its dramatic growth, blockchain technology is still in the nascent stages. It is still evolving and a lot of the benefits it promises are not commonplace yet. Security is one of them. While inherently designed to prevent frauds, blockchains are not immune to hacking. Ironically, private blockchains, which are closed networks, commonly used by businesses that want more control over data, are more prone to security risks than public blockchains, like Bitcoin.

Examining the pros and cons, seeking advice from blockchain experts, and identifying the business need, are all essential steps leaders must take before making the move to blockchain.

Why is regulation necessary?

Bitcoin may have initiated an entire movement as the ‘original crypto’ but the computing energy required to power a Bitcoin blockchain makes it expensive for smaller transactions. Add to that, the looming threat of security risks which has led to investors relying on crypto wallets and platforms that play the role of digital middlemen, a concept that this technology was designed to eliminate! With global investments booming, the technology demands regulation.

Having a regulatory framework in place is not only good investment practice, but it can also help maintain and boost financial stability. With comprehensive regulation, regulatory bodies can increase investor awareness, prevent illegal use of crypto, and protect against technological changes.

Our takeaway

The world of blockchain and crypto, while fascinating, is still young. Security is both a strength and a concern. Cryptocurrency transactions are anonymous and protected by the very way in which blockchain technology is built. But like everything, it is not completely immune to tampering. Before investing in the technology, businesses must identify their blockchain needs and roadmap instead of rushing to join the bandwagon.