After understanding the foundation of blockchain technology and related concepts, we will next learn about the real-life applications of blockchain technology.
Payment Systems
Blockchain technology provides a secure and transparent means of processing financial transactions. The transaction process does not require the involvement of an intermediary and differs from today's payment systems in terms of the degree of monopoly.
Currently, companies such as Visa and Mastercard control a large portion of the global payment processing infrastructure and have a huge market share through partnerships with banks around the world. Consumers then pay high transaction fees and have a limited choice of service providers, especially when it comes to cross-border remittances, which often entail high wire transfer fees and other processing costs. At the same time, the processing of these cross-border remittances is often affected by the processing speed of service providers, which can take as slow as three days or even a week to complete.
In contrast to traditional payment systems that rely on intermediaries to validate and settle transactions, blockchain technology can process transactions faster and reduce transaction costs. For example, compared to cross-border remittances, which can take days to process, blockchain can be processed in minutes and without high fees, in most cases for a small network processing fee.
For example, since El Salvador adopted bitcoin as legal tender, the cost of sending international remittances to friends and family has dropped significantly for Salvadorans working abroad. According to statistics, remittances into El Salvador in 2020 are estimated to be over $6 billion, or about 17% of the country's gross domestic product (GDP). Receiving remittances is less easy because many residents in relatively disadvantaged areas may not have access to formal banking services or have easy access to them through traditional payment systems. The adoption of Bitcoin as legal tender has undoubtedly brought great convenience to the citizens of El Salvador.
Legal Digital Currency
Money is the foundation of finance and is the universal medium for all economic activities based on the exchange of value. Needless to say, the scenario of a legal digital currency will be extremely large, complex and of strategic financial importance.Currently, some countries and regions have already started discussions and development of legal digital currencies directed by central banks. Legal digital currency is not only a medium alternative to traditional paper money, but can also achieve socio-economic efficiency in many ways.In addition, as an alternative form of cash money, legal digital currency is essentially a social basic public service, and therefore legal digital currency payment and clearing should be free for users. The costs incurred by commercial banks in the process of operating and managing the digital currency business on behalf of the central bank can be requested from the central bank, rather than being borne directly by the users.In addition, with the features of blockchain and distributed ledger, the legal digital currency will have certain advantages in anti-money laundering, anti-terrorist financing and anti-tax evasion compared to the current cash bills or bank settlement system.Lending and Insurance
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Crypto investment involves significant risks. Please proceed with caution. The course shall not be considered investment or financial advice.