Intern Spotlight: Summer Zhou | Blockchain
MIT FCU was so excited to host three interns throughout the month of January as part of the MIT PKG internship program. This year's theme was Tech for Social Good, and one of our marketing interns, Summer Zhou, researched how Blockchain is revolutionizing finance as we know it.
Blockchain: Revolutionizing Finance for Inclusion and Empowerment
Bitcoin has become a buzzword in both the tech and finance industries, owing much of its popularity to a remarkable surge in value—from $0.05 per bitcoin in 2010 to a peak of nearly $70,000 per bitcoin in 2023. Beyond its financial allure, the decentralized and distributed ledger technology underlying Bitcoin, known as blockchain, holds the potential to revolutionize financial systems. In this article, we will delve into the fundamentals of blockchain, explore its profound impact on finance, and discuss its contribution to fostering a more inclusive and equitable society.
Invented in 1991 for timestamping digital documents, blockchain gained significance in 2009 when Satoshi Nakamoto adapted the technology to create Bitcoin. A blockchain consists of a series of blocks, each containing stored data, the block's hash, and the hash of the preceding block. Tampering with one block alters its hash, and as the subsequent block contains its original hash, making one such tampered block valid to the blockchain would require one to tamper all of its subsequent blocks. Additionally, every user has a copy of the blockchain, making it challenging for a tampered copy to be accepted by the peer-to-peer network. Achieving acceptance would require tampering with over 50 percent of the remaining copies, making this task virtually impossible. This technology shifts the reliance from centralized institutions to a decentralized system where information is maintained collectively by the public.
Operating on a peer-to-peer network, blockchain eliminates the need for intermediaries in financial transactions, offering a faster, more efficient, and cost-effective alternative. It ensures secure, transparent, and tamper-resistant record-keeping.
Positive Social Impact
Due to its decentralized nature, blockchain technology holds the potential to significantly impact the global economy across various dimensions. To begin with, it plays a crucial role in fostering financial inclusion by extending banking services to underbanked populations. Numerous DeFi(decentralized finance) services like Aave and Lido have been introduced to the public in the past years. Those lacking access to traditional banking systems, or those who lack confidence in the security of their area’s traditional banking system, can now seek an alternative and actively engage in the global economy through the blockchain-based financial services.
Furthermore, the transparency and efficiency inherent in blockchain can help reduce transaction costs, which is especially valuable for small local businesses. Such empowerment would in turn play a pivotal role in local economic development and job creation.
While blockchain technology holds significant potential for fostering positive social impact, its widespread adoption in everyday transactions presents challenges for individuals with modest means. The intricate understanding required of blockchain technology can act as a barrier, particularly for those with limited financial literacy or access to technological resources. Moreover, the decentralized and anonymous nature of blockchain, coupled with the lack of governmental oversight, may open avenues for potential misuse or illicit activities, lacking the regulatory safeguards present in traditional financial systems. Balancing the empowerment of the general public with the necessity for oversight to prevent abuse stands as a crucial challenge in the broad acceptance of blockchain-based currency.
In conclusion, the decentralized nature of blockchain technology holds the potential to significantly transform financial inclusion and empower small businesses. However, realizing this transformation necessitates a global increase in financial literacy and the implementation of clearly defined rules for public adherence. With the appropriate measures in place, blockchain technology could revolutionize the fundamental operational rules of the financial world.
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