We’re not even talking about mere complexity at this point. The digital sector brims with complexity. The Internet has facilitated a global linkage system of individuals, firms, and entities all operating, communicating, and transacting in perpetuity with complete absence of a central command.
Facebook and Twitter already function as massive unregulated social ledgers populated by a third of the planet. The financial sector is an almost inherently complex system of interchange. Look at the theoretical underpinnings of credit for instance. An entity exchanges an intangible quality (trust) with some individual for a tangible item, wherein the individual granted the tangible item is posited with the unique responsibility of insuring that whatever product or service they are currently expending that tangible item upon (school or business endeavors for instance) will eventually grant them the means to pay back the initial entity in surplus of what that entity had granted the individual in the first place.
The distinguishing factor is that the financial industry has been blanketed by some form of centrality, such as banks, agencies, and regulators. Now, blockchain is shaking up the very core of finance! Here are the five ways that blockchain is disrupting the world of finance.
And then enter blockchain, a form of cryptocurrency transaction ledger so decentralized, so secure and so anonymous that we still can't conclude with utter definity yet who the mastermind behind the mechanism is! Common consensus indicates that an identity or alias named Satoshi Nakamoto is the "culprit". Financial entities running a wide gamut (from banks to accounting/audit firms to hedge funds) are almost scrambling in their collective attempts to understand the implications of the secure, perpetual digital ledger.
The significance of credit lies in the convenience for which it grants individuals and firms dealing with large expenditures, where it would be highly unfeasible to physically exchange the intended amount of currency. However, much in the way that the truly revolutionary insights of physics are coming from insights gleaned at analyzing phenomena at the quantum level, the financial industry seems to be pivoting on its head in a similar manner. In 2006, Muhummad Yunus and his financial entity Grameen Bank were awarded the Nobel Peace Prize for the established notion of "micro-credit". Micro-credit basically assumes that there would be some utility in granting loans even when the expenditure is not one that would commonly be considered as too large for the exchange to occur using physical currency. There is some practicality here, since the notion of “micro”, or “macro” is relative. 20 yen can be a large amount to an impoverished individual whereas 20,000 yen could be considered a microscopic amount to someone wealthier. With the immense divisibility of cryptocurrency, to not consider its potential conveniences for lending purposes would be inexcusable. In fact, there are already lending platforms to facilitate blockchain loans, such as SALT, or Secure Automated Lending Technology!
Much as for sentiments aforementioned, blockchain cuts out intermediaries, is near-perfectly encrypted and once recorded, the ledger can't be manually altered. If its implementation became widespread, accounting and auditing firms would have better evidence towards the existence and validity of transactions, as the blockchain is immutable and unalterable!
I've been iterating the above sentiment to some degree already, especially with regard to credit-granting entities in terms of its convenience and even further utility on market exchanges.
Humans like convenience. The Netflix model of digital rental was highly volatile to movie rental servers who required physical exchange of product. The implications of Airbnb are similarly affecting the hotel industry. Of course, you need a physical shelter. But Airbnb offers a more decentralized, unregulated mode of similar service which cuts out intermediaries and is by nature very diffuse, similar to blockchain! Is blockchain the equivalent of Netflix or Airbnb with regards to transaction-execution, currency-exchange, record-keeping and digital-ledger?