The introduction of 5G technology is the high point of conversation these days, and it is so for a good reason. 5G has the potential to completely transform the world of business and communication with an unparalleled increase in speed and strength of Internet connectivity. It will also play a pivotal role in enhancing the potential of various emerging technologies such as artificial intelligence (AI), augmented reality (AR), virtual reality (VR), and blockchain.
The impact of the 5G technology on blockchains, succinctly put, could be profound. The combination of the two could be a game-changing factor 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 secured 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 inaccessible, the decentralised DLT would continue to process and maintain the transaction ledger. If blockchain networks can provide payment solutions, it could be of great significance to both the under-banked and unbanked.
While 5G alone has the potential to boost the already successful segment of micropayments; blockchain empowered by 5G together could elevate digital and micropayments to a completely new level.
5G would also be beneficial to the Internet of Things (IoT), which would, as a result, propel blockchain technology further ahead. Blockchain’s unique features like decentralisation, security encryption, and immunity to malware attacks, among others, could prove valuable for various innovations, such as smart homes and cities, self-driven cars, etc.
Blockchain as a technology requires huge network capacity to function optimally. This is another reason why 5G is a boon as it is highly capable of providing the required network capacity.
Higher network capacity would also mean lower block times and greater scalability, and that could be the solution to blockchain’s biggest challenge up till now. Even though both Bitcoin and Ethereum have made progress in terms of size, their transaction speeds cannot possibly match the scale that well-established financial institutions are accustomed to.
With 5G offering broadband-level speeds, digital assets should soon be able to catch up with financial giants like MasterCard and Visa in delivering the number of transactions per second. And that could possibly change everything.
Blockchain also enhances the productivity of smart contracts. Oracles, which act as data feeds for connected smart contracts, are essential to the functionality of smart contracts.
These oracles require continuous Internet access to deliver and receive data in order for this system to be practical. Oracle and smart contract adoption would be significantly easier, especially in rural places, with the global rollout of 5G technology.
Furthermore, 5G would also improve the connectivity for smartphone and tablet users, thereby enabling larger network participation. This would mean an increase in the number of active nodes, leading to the diversification of blockchain as well as its democratisation 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 upsides of the 5G network and the potential benefits of its collaboration with the blockchain, there are also some downsides. There is always a chance of malevolent entities and devices joining the network and causing trouble. But as interconnectedness grows, this is an unavoidable side effect.
With the launch of 5G, demand for blockchain apps and digital assets may impose an excessive level of demand on these networks, leaving these networks with a lack of scale with which to keep up, which is one of the potential challenges.
To sum it all up, the collaboration of 5G and blockchain has the potential to lead businesses and individuals across the globe towards a better future.
(The author is the CEO and CTO at Rooba.Finance.)
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