Brief about the concept of “Blockchain Technology”
The Blockchain Technology revolution is in full swing these days. The technology is an append-only transaction ledger, providing transparency, improving the efficiency and security of the transaction. It is consensus-driven, meaning all members must agree. Miners do the work of validating and ensuring all parties are in consensus. This ensures an immutable, consensus-driven, decentralized, trustless, a public ledger secured by cryptography.
Various Businesses gradually adopting Blockchain technology
Before the advent of the blockchain, there was no way to validate ownership in a digital asset or verify a transaction in a trustless public platform. For example, if you purchase a licensed version of some software, the Company needs to check on its server before endorsing you the rights to access the software. This Central hub of data is highly vulnerable to various attacks and can’t be trusted blindfolded.
The early use of blockchain can be found in cryptocurrencies such as Bitcoin. Then later on people discovered its application in various businesses and technologies.
Take another example of a manufacturing business. It becomes very difficult to keep track of the processes currently running in the company. Only a few people know about the whole cycle and others are limited in their domains. Using blockchain every transaction will be recorded in the public ledger, hence, will be visible to each and one of the company. In this way, things become less complicated.
Many industries and firms such as Healthcare, Distributed Cloud Storage, Energy, Digital Identity, Smart Property, Machine Learning, etc have discovered the potential of Blockchain in their respective fields. Its benefits and applications, particularly in the Financial Services Sector, is also noteworthy. Lastly, the advent of blockchain and cryptocurrency stocks has allowed many companies to fund their development of innovative products and services.
Benefits of Blockchain technology in Financial Services
Banking system and other financial services have been across the world for a long period of time. It takes outstretched time to complete various monetary transactions. This can drastically affect the efficiency and comfort of a potential customer. Blockchain can help improve and update the outdated backing system. This can be achieved using blockchain Technology giving faster, cheaper and more efficient transactions. Here, we have mentioned 6 benefits of blockchain technology in financial services:
1. Quicker financial transactions
Nowadays, it takes a lot of days to complete a transaction in a bank. It could range from a few days to even weeks. This happens because they have to clear through the Gateways. If these transactions are replaced with blockchain it will take only a few seconds to complete the same. Hence it can be observed that there is an elimination of a third-party gateway which will result in fast-paced financial transactions.
2. Reduced cost
This is one of the main benefits of the blockchain Technology. Every transaction that we carry on passes through various checkpoints and verifications, via Intermediary. This makes the process lengthy and costly. We are charged for the services, accordingly. If there is no third party gateway at all, we need not pay for their relevant charges. This, in turn, reduces the overall cost of the transaction.
3. Less prone to fraud cases
Across the world, every system including the banking system is designed to function under a centralized database. The data with the centralized hub remains highly sensitive and prone to hacking. If the hub gets intruded then it becomes easy for the hackers to intervene into the Company’s whole customer database and ruin it. But things are pretty well positioned using a blockchain technology. As we know blockchain is a distributed ledger system where each transaction has its timestamp. This technology can hence mitigate financial fraud cases.
As there is no third party involved, both parties involved put in their private keys and create a smart contract. There is no requirement of a third-party who will act as a regulator for the approval of the transaction. As the Blockchain is an Open Ledger there are Miners to look in for the genuine or validate a particular transaction. Hence, Banks and blockchain companies can come together to create such a contract of any completed transaction. And also note that before the actual process various criteria also need to be fulfilled.
5. Efficient Know your customer (KYC)
On an average Bank spend the maximum of $500 million yearly for KYC campaigns. Blockchain Technology offers transparency and the cross verification of financial transaction with fewer efforts. Each transaction is recorded in the blockchain. It is very difficult to delete or modify the transaction done by a user using blockchain Technology.
6. Reducing operational errors in trading platforms
Most of the Financial Institutions of trading platforms are vulnerable to the error occurring from operational activities as well as fraud cases. This can be mitigated a lot using blockchain Technology as everyone is aware of the latest transactions happening with proper hashcode assigned with embedded hashcode of the previous block in the series. Thus it makes trading platforms safe and Secure for exchanges.