by Lumai Mubanga
Disintermediation is the ability to remove intermediaries in financial transactions to save costs. Many intermediaries in business circles are known for surcharging or overcharging clients. Good examples are the costs we incur when we send money through the banks or the costs we incur in the transportation of goods and services over a value chain.
Blockchain has however demonstrated that intermediaries can be done away with effectively, if not at a lesser cost than is attainable today. Just how powerful is blockchain disintermediation effect on businesses and financial transactions?
Intermediation is all about eliminating an agent to perform a task for you. One interesting property in blockchain design is the ability o developers to create a blockchain that can secure data on storage space on the ledger. This design has been critical in empowering people to own their data. It grants the owner power to own and control their own data. This is different from current technologies, which can own your data, sell it, store it or even exchange it for something else without your consent.
Data has become a very important asset. To own and control your own data is a leap forward because it empowers you to choose who can see it, whom you can share it with as well as which organizations can have access to it. That is one way how powerful block chain’s disintermediation effect can be.
Secure Peer to Peer Transactions
Another area were block chain’s disintermediation effects has been felt is in the day-to-day transactions where the opportunity for peer-to-peer transactions. Clearly, this eliminates intermediaries. Take as an example the purchase of good and services. When you pay through your credit or debit card for goods, the current system, your database records at your bank are debited while the database records for your service provider is credited. You have no control of that. Instead, you depend on that intermediary to validate your transactions. Blockchain changes that altogether. Blockchain allows you to have your transactions debited directly from your records and credited to your supplier of services or goods. Besides being cheap, it gives you power and control over your finances.
The same applies to data stored on health care systems. The owners of the records will have the power to choose who can have access to it thereby securing privacy over health issues. But how does this peer to peer layer of transaction create trust and curb corruption?
Heightened Trust and Cost Saving
Disintermediation has two more clear effects on the system. It has brought about heightened trust and has cut costs indirectly. How so?
Think about current systems that are highly secure and makes data inaccessible. This has bread dishonesty among individuals who may want to break into systems. To counter that, the current system has been designed to safeguard this data through policies and regulations that have increased overheads.
However, with blockchain systems, malicious actors would have to identify and target numerous points of failure until they control more than 51% of what is known as consensus. It is nearly an insurmountable task.
Therefore, blockchain powerful effects can be seen in giving power to the people, secure peer to peer transactions and a heightened sense of trust and cost-saving measures.