What this combination means for the financial world
The introduction of 5G technology is the highlight of the conversation these days, and for good reason. 5G has the potential to completely transform the world of business and communications with an unprecedented increase in the speed and strength of Internet connectivity. It will also play a central role in increasing the potential of various new technologies such as artificial intelligence (AI), augmented reality (AR), virtual reality (VR) and blockchain.
The impact of 5G technology on blockchains, in short, could be profound. The combination of the two can be a factor of change in the financial world. The banking sector, specifically, has already been using various forms of blockchain or Distributed Ledger Technology (DLT) for some time now for security purposes.
DLT enables highly secure transactions without the need for a central authority. For an end user, this means that even if the banks’ central servers were compromised or became unavailable, the decentralized DLT would continue to process and maintain the transaction ledger. If blockchain networks can offer payment solutions, it could be of great importance to both the underbanked and the unbanked.
While 5G alone has the potential to boost the already successful segment of micropayments; blockchain enabled by 5G together can raise digital payments and micropayments to a whole new level.
5G will also benefit the Internet of Things (IoT), which as a result will drive blockchain technology forward. Blockchain’s unique features such as decentralization, security encryption, and immunity to malware attacks, among others, may prove valuable for various innovations, such as smart homes and cities, self-driving cars, etc.
Blockchain as a technology requires enormous network capacity to function optimally. This is another reason why 5G is a blessing as it is very capable of providing the necessary network capacity.
Higher network capacity will also mean lower blocking times and greater scalability, and that could be the solution to blockchain’s biggest challenge so far. Although both Bitcoin and Ethereum have made strides in terms of size, their transaction speeds cannot possibly match the scale that well-established financial institutions are used to.
With 5G offering broadband-level speeds, digital assets should soon be able to catch up with financial giants like MasterCard and Visa when it comes to delivering the number of transactions per second. And that could possibly change everything.
Blockchain also increases the productivity of smart contracts. Oracles, which act as data streams for connected smart contracts, are essential to the functionality of smart contracts.
These oracles require continuous Internet access to deliver and receive data for this system to be practical. Adoption of Oracle and smart contracts would be significantly easier, especially in rural areas, with the global rollout of 5G technology.
Furthermore, 5G will also improve connectivity for smartphone and tablet users, thereby enabling greater network participation. This will mean an increase in the number of active nodes, leading to blockchain diversification as well as democratization worldwide. In short, 5G would offer higher network capacity, greater scalability, higher node participation, and lower latency and time to process blocks.
Having mentioned all the advantages of the 5G network and the potential advantages of the cooperation with the blockchain, there are also some disadvantages. There is always a chance of malicious devices and devices joining the network and causing problems. But as attachment increases, this is an inevitable side effect.
With the launch of 5G, the demand for blockchain apps and digital assets may impose excessive demand on these networks, leaving these networks with a lack of scale to keep up with, which is one of the potential challenges.
To sum it all up, the collaboration between 5G and blockchain has the potential to lead businesses and individuals around the world towards a better future.
(The author is CEO and CTO of Rooba.Finance.)
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