How might Blockchain technology impact Britain after the Brexit deal?
Wait…What? Brexit deal and Blockchain???? What’s the connection? Don’t worry! This was the first question that came to my mind when I first thought about the topic, but I will go in detail as to how Blockchain technology might impact Britain’s financial system after the Brexit deal.
What’s the Brexit deal any way?
Brexit simple means “British exit” from the European Union. The European Union (EU) is an economic and political union that involves 28 European countries (now 27 after Brexit). The EU allows for free trade and free movement of people between these countries and was created after WWII to strengthen trade and economy between European countries. The main reason Britain left the EU is that it wants to take control of its borders and policies rather than relying on a third party. Furthermore, Britain thinks that EU is holding back Britain’s business with too many business regulations. However, these are just a few reasons on why Britain exit the EU.
What’s blockchain technology?
In short, blockchain technology contains a set of blocks that are connected to each other via hash encryptions. We can think of hash encryptions as a fingerprint that has the blocks data. Changing the data of the blockchain, changes the hash of the block which then breaks the connection of the blockchain. This makes it difficult to tamper with the blockchain. Another cool thing about blockchain technology is that it’s a decentralized technology that increases transparency of information. Also, the information inside blockchain is distributed among many nodes(computers).
If you want a full explanation about blockchain and its use cases in the financial industry, check out my blog here!
Brexit deal and Blockchain technology: What’s the connection?
Now that we have the basics of Brexit and Blockchain technology down, you maybe asking yourself how Blockchain technology can help Britain after the Brexit deal.
In order to fully realize the impact of Blockhain on Britain after the Brexit deal, there has been an ongoing debate between Blockchain advocates and critics.
What do the Blockchain advocates say?
According to an article on cointelegraph.com, the finance minister of Britain was asked about how Britain will solve the UK-Irish border as well as the trade issues after the Brexit deal and he said that the solution is blockchain technology.
“There is technology becoming available […] I don’t claim to be an expert on it but the most obvious technology is blockchain.”- Britain’s finance minister.
But how might blockchain help Britain after the Brexit deal? Well, there are many ways Blockchain technology can help. These are:-
1. Trade finances
The Brexit deal impacted trade agreements between many EU countries and Britain. Before Brexit, EU countries could trade freely and without any trade expenses. However, the Brexit deal has allowed some business owners to fear over trading costs.
Cryptocurrency, blockchain’s massive innovation, can play big role in trade between EU countries and Britain.Cryptocurrency can be used as a tool for many businesses to send and receive transactions. Since everyone is using the same cryptocurrency, businesses don’t have to worry about exchange rates between different currencies. Another benefit of using cryptocurrency is that there will be lower tax and fees as there’s no third party to govern the transaction. In addition, the transaction will be recorded in detail into the blockchain which can help track transactions and logistics easier.
2. Efficiency in supply chain and logistics
Today’s supply chain, ranging from producers to distributors, often have to go through a complex system of contracts, certificates and approvals in order to upheld existing custom and regulatory agencies policies. This includes exchange of different information among many entities that could result in error and possible fraud.
However, with blockchain, these processes can be made fast and efficient. From the place where the product was produced to where it was handled and manufactured, blockchain records every detail efficiently. Information on any shipment — whether it be a proof of purchase, a clearance form, a bill of lading, insurance — can be made part of a block, a transparent chain of custody, and be accessible to suppliers, transporters, buyers, and auditors. This, in turn, decreases accounting and auditing cost for businesses. Since blockchain is a decentralized technology, chances of fraud and error are reduced.
But, what do the critics say?
There are some potential concerns that the critics raise about using blockchain technology in Britain after the Brexit deal. Some of these concerns are:-
1. Blockchain is still a NEW technology!
Yes it’s! Blockchain is in its early stages which means that the technology still has to improve on potential security concerns before being called “secure.” This is one of the most common concern among critics, however, in the grand scheme of things, a technology can’t be improved until and unless it gets tested and used in real-world applications.Even though businesses are unsure of the technology, it can still lead to massive improvements if implemented correctly.
2. Cost and Efficiency
It’s a no brainer that Blockchain technology will significantly reduce costs in the financial industry, however, the infrastructure of setting up the blockchain is quite expensive. It requires many computers/nodes to be set up to make it more decentralized and less prone to failures by hackers. Therefore, companies might not invest in a technology that is expensive and at the same time evolving.
3. Lack of Security
Even though blockchain is deemed to be cryptographically secured, there’s still some doubt that blockchain is not as secure as it could be. With blockchain, hackers can get control of the entire blockchain in the case of a “51 percent” attack. The “51 percent” happens when hackers get control of 51 percent of the network in the blockchain. This allows hackers to add fake transactions to the blockchain and change the data inside the blockchain in their favor. The probability of the “51 percent” attack is rare since the hackers have to hack the network all at once and in a short period of time, however, it’s still feared in the blockchain system
Looking at the big picture, Blockchain holds a promising future. If we consider the pros of blockchain, that is, improvement in trade finance and logistics, it outweighs the cons. Of course blockchain like any other technology is not perfect and still has to improve, but the UK can still invest in the technology and try to evaluate whether the technology will be beneficial to improve Britain’s financial system after the Brexit deal.
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