Along with the upward trend in the number of blockchain startups and cryptocurrency exchanges in recent years, blockchain is no longer a novel concept. According to experts, blockchain is recognized as a promising successor to the Internet, which means the technology will radically transform multiple sectors including healthcare, supply chain, energy, and especially, financial services in the near future. This article will discuss in what way blockchain can be adopted in finance industry.
Image Source: Hackernoon
Which features of blockchain are applicable in financial sector?
Generally, blockchain is a distributed digital ledger where all transactions can be recorded and verified electronically over a network of innumerable computers around the world. Besides, blockchain is obviously an innovative invention thanks to its key characteristics including decentralisation, immutability together with transparency.
Firstly, blockchain serves as a decentralized system allowing users within the network to store and access their assets over the Internet. The core power of decentralized technology is to enable users to directly control their information and transactions, placing their trust not only in a single entity such as government or intermediary. As a result, without the risks arising from third-party, the users will experience lower transaction costs and higher transparency.
Moreover, blockchain presents a verifiable and transparent record of transactions. Every user in such network is provided with an identical copy of the ledger, which allows real time tracking and minimizes any data tamper or system manipulation..
In the context of current insecure financial environment, the emergence of blockchain technology serves as an optimal solution conducive to a safe and tamper-free environment.
Significant use cases
#1: International Payments
With current process, the remittance of money across countries is lengthy and tedious, taking several days or weeks on average. Also it is very challenging to trace the source of the money and execute anti-money laundering exercise, letting alone the high transaction fee. Thanks to blockchain, many of traditional middleman can be deducted, cutting down 2-3% of the total costs and accelerating the whole transaction process.
Image Source: Currency Converters
#2: Smart contracts
The development of international integration has led to the increasing demand in expanding business of enterprises, and as a result, international commerce has become prevalent worldwide. However, most companies participating in international trade usually face with the biggest risk – the breach of contract by the partners. In such light, the appearance of smart contracts, a promising application of blockchain technology, enables the commercial transactions and agreements to be executed automatically without any middleman. Smart contracts is programmed with the purpose of emulating contractual clauses, ensuring fully self-executing or self-enforcing execution of contractual agreement.
Image Source: InsuranceUp
#3: Shared trading platform
The procedure of purchasing and selling stocks and shares requires numerous middlemen involved, including brokers and also stock exchange. With the superiority of blockchain as a decentralized and secure system, traders is granted the right to validate the transactions and speed up the settlement process. Thus, the security and the accuracy of the exchange are assured without any incurred middleman costs.
The severe criticisms against Bitcoin – the first generation of blockchain may have raised suspicion concerning the intrinsic value as well as the applicability of this technology to life. However, it is undeniable that blockchain has brought about a vivid disruptive effect on our lives, especially almost every sector of the finance industry. Although blockchain is still in its relative infancy, the adoption of the technology definitely should not be understated.
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