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Today, it is possible to eliminate middlemen with blockchain by encouraging users to communicate and trade directly with each other. Intermediation has been an integral part of global trade and transactions. In fact, mediation services have continued since the distant past with the exchange of goods with goods using the medium of exchange and the start of e-commerce. But in today’s world, with the expansion of the Internet and many businesses going online, the need for intermediaries has decreased.
Blockchain technology can also be considered as the greatest broker, which is able to eliminate all brokers with the p2p system.
Decentralized programs of the blockchain network provide services to users independently and freely without dependence on any organization or company. Despite the challenges facing decentralized programs and its lack of acceptance by many people as an alternative to traditional services, we cannot ignore the importance of blockchain technology and its expansion in order to eliminate intermediaries.
Maybe many of you are wondering if the blockchain technology will destroy intermediary services? And what fundamental importance will this issue have for cryptos? Stay with me to get your answer.
Centralize mediation and centralized system
If you imagine that you are going to buy 1000 dollars, you can go to the exchange as a traditional method in the first place. A currency exchange or broker is a person who buys and sells dollars. Don’t doubt that the existence of such a system that human reason has created for many years has been necessary for the success of people’s work.
A money changer, currency broker or currency intermediary and their customers form a centralized system. In a centralized system, all clients are connected to a main server, which is a currency exchange or broker, without any relationship. Customers do not necessarily know each other and only the system of the center and the exchange recognizes and authenticates customers.
In the centralized system, by turning off the main system, the entire system will be turned off. Because in these systems, the key to turn it on and off is in the hands of an institution, organization, person or government. For example, if the money changer closes his shop and does not buy and sell, it is no longer possible to buy and sell currency. In fact, in a centralized system, it is necessary to have a broker that customers can trust and refer to for buying and trading.
Disintermediation and the introduction of the p2p system
In centralized systems, the broker plays the role of a server without which computers are unable to connect to each other in a centralized system. To better understand this, imagine a friend who asks you to buy some of his dollars. In this case, you have eliminated the broker or middleman in your transaction, and thus your costs are also reduced. Knowingly and directly entering the transaction without the presence of a broker is the first step to form a p2p or peer-to-peer system.
The p2p system (peer-to-peer or peer-to-peer system) refers to a system in which members communicate with each other directly without any central authority or intermediary. This system is a type of distributed system that connects the end users of each system without the need for intermediaries. The p2p system is rapidly eliminating the role of brokers and intermediaries.
In fact, these systems are gradually and with steady steps being replaced by any intermediary business. This global phenomenon called disintermediation is rapidly expanding in the world. In a p2p system created for example for an exchange, you will no longer need any intermediary as an exchange.
In the process of this system, anyone who wants to sell their currency can connect to the final buyer, and in the meantime, the broker’s fee will be zero. Anyone who wants to buy currency can also directly buy the desired currency from the seller without any fees and at the best price. There is a fundamental problem here that we must solve.
The problem of disintermediation systems and its solution
The problem with P2P or peer-to-peer systems is transaction authenticity. When you buy currency from a money changer, you actually trust him. Because that money changer has the necessary permits from the relevant authorities and the centralization system has approved it. But in the p2p system, the party to your account is a person or icon on the Internet that you have no knowledge of. Now, how can we trust him and entrust him with money dearer than our lives?
Mr. Satoshi Nakamoto introduced cryptos as a solution for this problem. In this method, the blockchain is responsible for guaranteeing the transaction without the need of any third party or authority. This can eliminate intermediaries with the blockchain, but we cannot ignore the energy consumption of the blockchain, the cost and difficulty of mining bitcoins, etc.
Decentralize programs
Decentralized applications use blockchain networks to run and operate instead of centralized servers. In fact, these programs are not affiliated to a single institution and the team of developers with the participation of community members play a role in managing and directing it.
During the past years, many decentralized programs have been presented in the blockchain, which have been able to provide services such as investment funds, digital banking, and social media in a decentralized and unmediated manner to users using smart contracts. Decentralized exchanges are an example of these programs, although They do not support fiat currency, but it is possible to exchange digital currency in them, and they do not need to register and authenticate to use the services.
Blockchain security and privacy are among the reasons that have attracted many investors.
In addition to exchanges, game and prediction platforms, markets for buying and selling non-traditional tokens, and social networks are also among the most used cases of decentralized applications. But despite the high diversity of these programs, they still cannot be considered as a replacement for centralized and traditional programs on a global scale, and we can definitely comment on the elimination of intermediaries with blockchain.
Read more: How can blockchain security be increased?
Advantages of decentralized applications
One of the main advantages and strengths of decentralized programs and the Decentralize system is its lack of dependence on a central server. These programs are based on blockchain. Therefore, they will not be managed by a specific server or a single organization. This has increased their security.
Of course, the possibility of hacking and non-standard coding and other security weaknesses cannot be ignored. Blockchain technology, in addition to the security of decentralized applications, ensures the preservation of user data. On the other hand, due to encryption of data, it is very difficult and unlikely to change and manipulate them.
On the other hand, decentralized programs, due to non-compliance with sanctions, have also provided the possibility for Iranian users to operate. Due to the fact that decentralized programs do not have any central authority, no one is able to determine the task for them, and for this purpose, they must be subject to collective decisions and voting. Of course, this causes their updating and development to be slower than traditional and centralized programs; Because for every small problem, the consensus of the majority and voting of users is needed.
The cost of creating, developing and using these programs is lower than traditional programs. Because in many times expenses are paid using local tokens and activities are done by voluntary participation.
The use of smart contracts will also automate activities and eliminate intermediaries with blockchain. Therefore, decentralized applications do not charge fees for providing services to their users, and the fees received are only due to the processing of data and transactions in the blockchain. The absence of an intermediary to control and manage activities in these programs has led to greater speed.
Problems of decentralized applications
Despite all the advantages mentioned about centralized programs in blockchain networks that can eliminate middlemen with blockchain, these programs still have two big problems.
The difficulty and costs of transactions in the blockchain network are two important problems of these programs. Using the blockchain network has more complications compared to traditional applications. Therefore, elderly people and people unfamiliar with this technology will not have a good experience working with them. On the other hand, the cost of transaction fees in some networks such as Ethereum is significant and makes this service not useful for users. However, these programs with
Unique features can bring many interactions and financial activities with vast changes in the future and create a new economy without centralized powers and intermediaries.
Blockchain technology is one of the best inventions after the Internet. This technology has made it possible to eliminate intermediaries in some ways. Blockchain functions almost the same as traditional databases such as banking systems.
But the efficiency and security of blockchain is higher and it can keep all the activities inside its blocks safely. Blockchain is a kind of decentralized database that stores the transaction records of digital transactions.
In response to the question, is it possible to eliminate middlemen with blockchain? You can answer both yes and no.
Blockchain and p2p systems do not eliminate disintermediation services; But they will transform the current mediations. Until today, they have made these changes to a large extent. In fact, we are witnessing the dimming and disappearance of many intermediary jobs. In fact, it can be said that mediation has not disappeared, but only changed its shape.
For example, traditional taxi agencies have been gradually abandoned and p2p systems, which are internet taxi companies, have been created. Small brokers have disappeared and big brokers have taken their place. Examples of these items include Digikala, Snap, TapC, etc. cited. In fact, the process of human life is moving towards disintermediation and elimination of intermediaries with blockchain.
