“Blockchain technology is a form of digitalized, de-centralized public record of all cryptocurrency transactions. Blockchain was designed to record, not just financial-related transactions, but virtually everything of value.”
― Olawale Daniel
- Table of contents
- A faster way for payments
- System for clearance and settlements
- Assets are brought and sell
- Fundraising criteria
I would like to start with the initial. What exactly is blockchain and how its implementation it is influencing or changing the baking and finance sector? The clear concept of all these things can be readily understood by looking at the use cases as it would make the real side visible to us. From the past few years, Blockchain is creating a strong impact on the relevant sectors and the potential has benefited the sector as well which is a good start overall.
The blockchain sector is an open peer to peer network that works on a decentralized system. so here in the use of this system, there is no involvement of the third party and that reduce so many problems in one hand itself such as the data loss, data selling, theft within the centralized servers and many more. There is a procedure to maintain a full proof record of the transaction between two parties permanently and efficiently. There is an individual block of data present within the blockchain system and all these blocks are interjoined to form a network so the block created at the first day will also be present and no block is deleted ever.
All the people as parties involved in this leger are sharing the distributed ledger that makes blockchain transaction faster as compare to others. The faster criteria are one of the benefits blockchain provides as there is a huge number we can count.
I will put up the use cases that could give a clear glimpse of all relevant potential of blockchain in the real world.
Once we know the specific features of blockchain then it would be clear why the banking and finance sector is adopting this technology. The reason why we set bank account to connect to access the various features bank offers us such as trade, investment and most importantly to safeguard our money by keeping it preserve at a particular place. The working criteria or the benefits blockchain provide is same but the system here works on a global scale. The security and transparency that it provides is the main upbringing here. Global commerce is also to uphold by blockchain the trading it provides has more relevancy as no paper-based network is required here. Streamlined and automated practices are given more appreciation here. Blockchain is not owned by any single entity is dependent on the network from the framework it carries.
The near future is owned by this technology and these test cases will provide you with the basic practices and procedures under it.
2. A faster way for payments:
As the decentralized system is been set up for carrying out payments in the banking industry. The banks can now make use of these emerging technology to carry out the payment in a faster way as compared to the past techniques. The fees that are the charge here for the processing is also been reduce. This can introduce by the banks as higher security is offered at first place which the main thing people/customer are looking for. A new level of service, introducing a new product in the market and also to strengthen its part in competing with the leading fintech startups. When finally, this technology will start taking up the market then a large amount of bank consulting third parties will be automatically cut off. The traditional system needs to replaced in term of every technique they adopt for serving the customers.
Customer is facing tremendous backlogs and security problem while using this technology. The system developed under blockchain is believed to take up the finance and banking sector fundamentally by 2035.
3. System for clearance and settlements:
The distributed ledger technology that we are talking about is capable to settle the transaction that is made directly and can even track it to be double sure. The tracking procedure is carried out using protocol SWIFT. When we talk about the traditional system used then it takes several days to settle the payment. The reason is the limitation in the fracture of the system. If the money has to be sent to foreign countries then it becomes a challenge for our banks but by the use of blockchain now such difficulties are made into control. Banks use a complex system as an intermediate party with the use of custodial services before it could reach the destination provided.
Also, all the global reaching system criteria are for huge trade and assets for which bank manage its system but the small trade and transaction is not proceeding with that ease. You need to run again and again to check the processing status and it could be possible that also even after the full processing is completed still the money does reach the assigned destination.
4. Assets are brought and sell:
The middleman which in terms of banks is the lead player is successfully removed by the blockchain as it lowers the asset exchange fees and also reduces the traditional market instability which is a problem in simple words. Moving the security through the blockchain system has reduced revenue from 24 million dollars to 17 million dollars that is a drastic saving in global trade processing price. When assets like stocks, commodities, or debts are bought then its all about to know who owns what and exactly how much. A complex network of exchanges, brokers, clearinghouses, central security depositories, and custodian system is used by the banks to track all the assets information. All these systems are based on the old concept of paperwork which is now not so cool and also a huge amount of time is wasted in doing so.
These so-called systems are very slow and even a lot of chances of theft remain an unsolvable doubt. Relying on such system is not a good option all the time as buyer sender and the receiver may be using different banking services for there work and relying on third-party for handling the paper certificate is not a good option when we consider the chance of security.
5. Fundraising criteria:
Venture capital for raising fund is a complex system nowadays also not a safe and easy side. The procedure is same a lot of time that entrepreneur asks the banks for the fund by raising their idea pitch and then debating negotiating overtime to get it approved. When we talk about the blockchain system then there is various alternative present through which the fund is raised. Initial Exchange Offerings (IEOs), Equity Token Offerings (ETO), and Security Token Offerings (STOs) are some so those alternatives providing huge opportunities. Among this STO is popular nowadays due to the legal protection it offers. Diligence process needs to be passed to get access to fundraising.
Now the fund is raised used and then according to the procedure it is paid back so in a simple word no case of fraud take place.
There is a huge role played through the domain of blockchain and still counting. Stay updated so that you can make the best use of it. Apart from the above points the peer-to-peer network, accounting and auditing, hedge funds are also done via blockchain systems.