Due to technological advances, the world of business is progressing at a rapid speed. Technology has enabled businesses to overcome the transactional barriers of distances across the world. Still, they are struggling with many old and new market frictions and obstacles. Blockchain promises to bring about the next revolution of changes. It will help global companies overcome obstacles in business transactions. Companies will be able to harness the power of blockchain to resolve market frictions that have slowed them down in the past.
Types of Market Frictions
Markets are complex mechanisms with many moving parts. The interactions between the parts can result in delays or interruptions of transactions. Taxes, regulations, bureaucracy, middlemen, conflicts in contracts and more can contribute to creating market frictions. Here are some of the problems observed across the world:
Using Blockchain to Overcome Market Frictions
Market frictions have always been part of the global trade. Every new generation of technology has helped resolve some of the issues of the past and magnify others. Even though transaction costs and time has gone down in recent years, the confusion due to misinformation and overflow of information has created new sets of problems. People can transact over the internet quickly, but there isn't a reliable way to ensure transaction authenticity. Blockchain technology promises to solve some of the new problems created by today's markets:
Reducing Information Frictions
Information is a valuable asset for businesses. They need information that is trustworthy and verifiable. Blockchain has properties that can help businesses decrease information frictions in the following ways:
Overcoming Interaction Frictions
Improving the transaction process can help with interaction frictions. The following blockchain properties can help:
Resolving Innovation Frictions
Innovation frictions involve changing human minds and attitudes. So it’s one of the most difficult market frictions to overcome. Here are a few ways blockchains can help:
Blockchain technology has potential to transform entire ecosystems. It can help organizations prevail over the challenges and market frictions of today. Companies can use the technology to gain more visibility into their organization's processes and provide relief for any pain points. The technology is already having a big impact. Transportation, pharmaceutical, healthcare, logistics, manufacturing and many more industries are improving due to the intervention of blockchain technology.
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