Blockchain Opportunities and Risks

Blockchain Opportunities and Risks


What nerds, analysts and economists generally agree on is that blockchain is an economic milestone with global implications. This new revolutionary technology allows you to create a global registry that transfers ownership rights, and through which values can be transferred within seconds if necessary. And this cannot be manipulated, since it exists in a decentralized manner, on millions of computers and without intermediate bodies, such as states or banks.

In addition to the “Internet of Information” that already exists today, the blockchain is designed to create an “Internet of Values”. The consequences will not only be fundamental for the financial business. The idea of a decentralized immutable data registry can turn the entire corporate landscape upside down – the effect will be comparable to the introduction of double-entry bookkeeping more than 500 years ago.

The most expensive network in the world

If software developers were more romantic in nature, blockchain would probably have a more lyrical name. Instead of a “chain of blocks”, it would most likely be something like “pearls” or “beads”. But…

Blocks are the main idea of the blockchain: like small crystal formations, individual elements combine to form a closed structure – a block. As soon as this object reaches its intended size, the next one is created and connected to the previous one. Thus, individual blocks gradually form a firmly connected chain.

In one thing, however, the digital blockchain is fundamentally different from a pearl necklace: each individual record of data in the blockchain can be much more valuable than a real pearl in the chain. Even more valuable than all the existing pearls and chains combined. One day, according to experts, the blockchain will even display all the world’s assets.

This is how blockchain Works

From a purely technical point of view, blockchain is a database of distributed transactions. The peculiarity of this is its structure: it grows as one digital block is attached to another. Thus, each block has exactly one chronological predecessor and one chronological successor.

There are no more links between the blocks, but the links with the previous and subsequent blocks cannot be broken. This digital link creates a list that documents user values as well as all stored data records at any time: a global trade repository.

This turns the blockchain into a huge digital record of data, which is updated in chronological order, and the transfer actions are archived inside the network of participants cryptographically sealed. Unlike conventional databases, the blockchain is not located on a single server: all network participants (so-called “nodes”) have a 100% identical copy of the complete block chain in their local memory.

Main features of the technology:

  • Immutable trade repository: the central element of any block chain.
  • All data records are stored in a decentralized database, which is redundant on several computers (nodes) in the network.
  • The trade repository is strictly additive: nothing can be changed or deleted retrospectively. Thus, the registry grows as new entries are added all the time.
  • Certain procedures ensure that only valid records are accepted and that the stored versions of the database are identical on all nodes.

A fully mature blockchain with these properties can be a revolutionary achievement for many corporate areas and industries in terms of security, authenticity, privacy and accessibility.

That’s why we all need blockchain

For skeptical Internet users, this thought is almost unimaginable. Namely, in what place does the digital block chain store the business agreements that the two participants have agreed on? And what does safe and confidential mean?

In fact, nothing and no one can harm this digitally registered transaction. Even if the millionth link of the chain is added to one end of the digital chain, the first one can still be identified as the beginning of the chain and stored in the form in which it was created. The links of the chain, their connections and, consequently, the whole chain are indestructible.

Would you say that this is pure fiction? No, this is reality.

Admittedly, all the technical problems related to the blockchain have not yet been solved. But the solution of open issues is under great attention. Because the properties associated with the blockchain principle promise companies huge benefits:

  1. The blockchain is unchanged. All subsequent processes are clearly and reliably documented with a time stamp.
  2. The blockchain data is identical for all nodes. This ensures the integrity of the stored data, and makes hacking attacks on the entire network extremely difficult, or almost impossible.
  3. Transfers take place almost in real time, not for hours or days.
  4. It is impossible to seize someone else’s property or sell it a second time.
  5.  The ambiguity of claims to values is excluded.
  6. Using cryptography, the technology guarantees verifiability and transparency, or confidentiality and anonymity, if necessary.

All transactions between participants take place without intermediaries, such as banks, notaries or the state. This rejection of intermediaries that strengthen trust, and, as a result, automation of business processes leads to time and money savings.

As long as the network is strong and secure enough, a blockchain with these properties can satisfy a large number of trust requirements that burden business processes and interactions today. Thus, the advantages of the technology can be used in many financial and non-financial applications.

It all started with Bitcoin

The most famous (and first) blockchain application is the Bitcoin cryptocurrency. A person or group under the pseudonym Satoshi Nakamoto developed software for him in 2008, under the impression of the bankruptcy of banks and governments during the financial crisis. The open source principle of the Bitcoin blockchain is the result of this skepticism towards institutional intermediaries: the new trade repository no longer requires a central authority, and should be open to everyone.

The Bitcoin cryptocurrency also works according to the above criteria of a stable block chain, and the immutability of the blockchain ensures the security of transactions when trading BTC.

Since the technology is open to everyone, there are many nodes in the Bitcoin network. Massive redundancy provides protection against data loss, and eliminates the possibility of operator manipulation of individual nodes.

Basically, Bitcoin blockchain transaction data is publicly available. The participants of the transaction identify themselves only using the account number (the so-called public key), which they store in their “wallet”, a bunch of digital keys. This procedure does not require a real name, it is called pseudonymous. Only with their private key in the wallet, users can prove that they own crypto assets. And only their private key allows them to transfer assets, as it authorizes the transaction as a cryptographic key.

Blockchains that are listed on, have different consensuses, and also provides application capabilities that go far beyond trading with cryptocurrency. Any information can be written to the blockchain. And since it is stored there invariably, at all times and with a time stamp, the blockchain fulfills important requirements for document storage obligations. This is a very attractive application area for commercial companies.

Corporate Benefits from Blockchain

In everyday work, the new technology offers exceptional opportunities for simplification, automation and increased reliability. The potential savings are primarily related to accounting, documentation, entering invoices, auditing and confirmation of ownership rights.

The transmission of values can be displayed in the block chain in such a way that there is complete agreement on both sides. Companies only need to reflect their internal accounting on the blockchain in order to fully register their transactions. Reconciliation of accounts inside and outside the company is no longer required, since the blockchain contains the only reliable and complete truth about transactions.

But this is not all that the blockchain allows. This is due to the fact that it can also be used to ensure the integrity of electronic documents in a cost-effective way: an electronic fingerprint of the scanned document is created and recorded in the blockchain. Thus, the fingerprint of the archived file can be compared with the fingerprint stored in the block chain at any later time, and if the prints match, the integrity can be proven beyond any doubt.

Thus, the use of blockchain to ensure integrity can minimize redundant control and verification processes, and electronic data can also be sent by email, for example, without violating their integrity. This audit-protected storage of documents with controlled visibility in a database accessible to everyone will lead to significant simplifications in the areas of accounting, auditing, compliance with storage requirements, intellectual property verification, etc.

Thus, commercial enterprises will use blockchain technology to benefit from it.


Blockchain capabilities will affect many industries. In particular, sectors of the economy with a large number of intermediaries who need trust may soon face huge changes, since blockchain technology makes it possible to store trade registers in a form protected from forgery and without the efforts of centralized authorities such as central banks, central registries, cadastral books and notaries.

Thus, any form of activity that is currently being carried out can be transferred to the blockchain platform at significantly lower transaction costs.