Soon blockchain and finance will be nearly synonymous. Blockchain technology is not just improving banking and finance but changing the way we interact with our money, data, and bureaucracies. In this article, we talk about how blockchain applications are changing traditional financial institutions. Blockchain offers finance new solutions to old money problems.
Paving the Way for the Financial Future
It is no exaggeration to say that every day the traditional financial industry becomes more and more amenable to the merits of merging traditional processes with blockchain solutions. Blockchain applications are offering profitable and sustainable solutions to our current financial needs. From services for effective applications of smart-contracts to more efficient global transactions.
Blockchain applications also offer potential solutions to many concerns about information processing and retention, as well as the expansion of global-banking capacities.
Major finance players have very recently embraced blockchain tech as seen with the JP Morgan cryptocurrency, or Fidelity's crypto custody service. These companies, and many more, are demonstrating the value that blockchain applications have to offer the financial industry.
Blockchain Technology and Finance are a Happy Couple
Blockchain has much to offer in meeting the current needs of the financial world. Here are few of the benefits of pairing the two:
- Blockchain platforms are decentralized, so they may be owned by a single entity, but are dependent on concurrent networks.
- The data is cryptographically stored via a hash inside each block.
- The blockchain is immutable, so no one can tamper with the data that is inside the blockchain without this affecting the other blocks of data.
- The blockchain is transparent so one can track the data and gain access to a full history of transactions.
- Smart-contracts allow for efficient and automated contracts.
- Storing information in a blockchain is an efficient means of storing and sharing customer data safely.
Public Ledgers and Transparency
By relying on shared or public ledgers, transactions that use blockchain are transparent and immutable. Relying on a shared ledger not only increases the accuracy and maintenance of transaction records. It also makes peer-to-peer transactions a functional reality. Doing so increases the diversity of exchanges and transactions while dramatically decreasing the risk.
The credited creator of Bitcoin, Satoshi Nakamoto, did not invent blockchain technology. Rather in 2008, he put into practice the cryptographically secured chain of blocks that was described in 1991 by Stuart Haber and W. Scott Stornetta. The driving idea behind Satoshi Nakamoto’s creation of the cryptocurrency bitcoin was a technology that could support safe peer-to-peer transactions and eliminate the need for a third party.
Until bitcoin, peer-to-peer transactions relied almost exclusively on the exchange of physical cash. The dependence on cash meant that making long distance transactions were difficult and risky. Blockchain applications are steadily mitigating and eliminate these obstacles and risks.
Because blockchain applications rely on public or semi-public ledgers, the risks of relying on centralized systems are being mitigated. By relying on a centralized system, a given network becomes far more vulnerable to compromised data. Because information is being held in one place. So, if the system fails or is held ransom, the whole network and its data are compromised. This is not the case for decentralized networks.
Centralized power also limits fair competition and potential participants, and suffers [inevitably] from corruption. Blockchain apps are often described as democratic. This is not only because of the decentralized network, but because of a public ledger of transactions that relies on the mutual agreement for their approval.
Moreover, the blockchain is democratic because it is more accessible than traditional financial institutions. That is institutions are the arbiters of who has access to what credit and controls borrowing and lending power. With a peer-to-peer system on blockchain, individuals have more agency in personal finance.
Transparency leads to accountability
Obviously, not many traditional financial institutions are ready to adopt this exact open model with blockchain. However, given the continued influence of the world of cryptocurrencies, it would come as no surprise if the public ledger became a necessity due to public demand. If a company wants clients and investors they will have to earn trust and show us what’s under the carpet; not simply hand over a bill of goods that we are simply expected to approve of.
Supply chains are steadily embracing this kind of transparency. IBM and Walmart are strong examples of companies that are particularly interested in using blockchain to do so.
Consumers and citizens alike deserve the basic tenets of transparency and accountability. In an ever expanding global economy, trust needs to be earned, not just freely given.