The blockchain could be a powerful technology that permits Bitcoin, Litecoin, Dogecoin, and different virtual currencies to be open, anonymous, and secure. The blockchain primarily could be information regarding each Bitcoin dealing intimately. Sometimes referred to as a “public ledger,” the log contains information regarding once and the way every dealing materialized. To stop meddling with current and additionally past transactions, the information is cryptographically secured. “Blockchain will have a profound impact not only on financial services also on business and society as a whole”, says Alex Tapscott, CEO of Northwest Passage Ventures consultancy and co-author of the book Blockchain Revolution.
This new innovative technology may be used for all transactions in which the price is concerned. Money, property, goods, and offerings are examples in which fee-based totally transactions. In contrast to our invoice that is regulated via the central authority, Bitcoin is unregulated and proven by the users who pay for items and services. Blockchain stores information in blocks and it is shared via everyone who is connected to the block. When every person joins the network he/she is attached to the block for executing transactions. Therefore, the Bitcoin blockchain can have all the past info of its utilization at any of the factor this is to be had for public get entry to. This also eliminates the need for a valuable device to keep and validate information.
As the conventional payment system wherein contracts are fulfilled when certain criteria are met and verified with the aid of the central authority.
In blockchain transactions, the contracts are stored in public ledger surpassing the middlemen to complete the agreement among the two parties smartly in no time. Blockchain technology has the ability to gear up the real-time fee mechanism that may provide cost-effective strategies for many monetary intermediaries who still look upon the central authority for clearing and agreement. distributed ledger mechanism leads to inordinate put off in settling transactions and client dissatisfaction which will be used as a driving force to address the new era solutions which could better solve these problems. The ledger is publicly accessible through APIs and torrent sites. To prevent tampering with current and also past transactions, the database is cryptographically secured. There is no central authority for clearing the transactions. This is the most significant advantage in blockchain as the mechanism is decentralized.
Let us understand how the payment system works in blockchain. For instance, if A wants to send money to B, the transaction is made as a block and sends the information to the earlier participants who were connected with the same money for validating their transactions for approval. Once the deal is approved the money is transferred to B and gets recorded in the ledger sequentially.
Beyond all the hype around blockchain, how will it really shape the traditional finance industry?
The blockchain is being identified as the new technology that would reduce fraud in the monetary world wherein 45% of financial intermediaries like stock exchanges and money switch services are susceptible to economic crimes routinely. most banking structures in the international, built on a centralized database, are more susceptible to cyber attack due to the fact once hackers attack the only system they get full access. This technology might remove a number of the present day crimes committed on-line nowadays against our financial institutions.
Know your Customer (KYC)
Financial institutions spend anywhere from $60 million up to $500 million per year to keep up with Know your Customer (KYC) and customer due to diligence regulations. According to a Thomson Reuters Survey. These regulations are meant to help reduce money laundering activities by having requirements for businesses to verify and identify their clients.
Blockchain facilitate smart contracts as they facilitate storage of any kind of digital information, including computer code that can be executed once two or more parties enter their keys. Contracts could be created and financial transactions executed when this code is programmed, according to the set criteria.
Blockchain disruption could be highly transformative in the payments process. It would allow banks higher security with minimal lower costs to process payment between organizations and their clients and even between banks themselves. Blockchain would get rid of all the intermediaries in the payment processing system.
In financial services, block-chain's distributed element will be used first in back-office tasks such as reconciliation of transactions and contracts, where the distributed ledgers will allow for faster updating and more accurate record keeping.
Leaders who see blockchain technology as an opportunity and not as a threat will lead the business organization to competitive advantage, efficiency in carrying out the business and overcome security threats. Blockchain can well become the potential game changer in the financial industry.