Blockchain’s digital record-keeping system allows for the easy recording of transactions with the added advantage of security and resilience. But, why is blockchain technology in the news?
Blockchain has saturated how operational fees and security measures work. Jamie Dimon, CEO of JPMorgan Chase & Co., has expressed concern about how blockchain operates by simplifying asset acquisition.
With an increasing number of companies leaning on this technology, the future of the financial sector may be affected. Keeping these factors in mind, we have penned down a blog examining how blockchain disrupts the end.
How does blockchain work?
As a distributed ledger technology, blockchain stores data on multiple databases. It does so via a peer-to-peer network compared to a single central server.
The primary function of blockchain technology is to store the details of any transaction. Furthermore, the chain is not subject to change over time, making it impossible for further editing and altering.
Blockchain's high-security functions are attributed to its distribution system. It implies there isn't a single point of failure, making it tricky for hackers to hack into sensitive information and steal data.
Because of its distributed system, it is also more efficient than any known intermediaries like banks and other payment processors. Due to these reasons, blockchain technology has evolved to be a highly efficient and appealing technology for individuals and businesses alike.
Financial areas with chances of disruption
Introducing distributed ledger technology (DLT) has made it easier for blockchain technology to employ financial cooperation. In addition to being cooperative, it is expected to raise ledger standards and pave an easier way. A financial technology course can offer you more insights into blockchain and its usage with DLT.
Blockchain enables donors to know the whereabouts of their money and how it is being used, making the process transparent. This technology can also build an efficient fundraising model with reduced overhead costs. Initial coin offerings (ICOs) are looking to integrate a new model into the financial world compared to traditional donation processing.
The rise of Bitcoin and Ethereum has led to several decentralised ledgers for initiating payments. Majority of the European Payments Council members believed blockchain would revolutionise the industry by 2025. In terms of payments, blockchain technologies offer users a secure and instantaneous payment option. With reduced costs and enabling services such as micropayments, it facilitates better transactions and payments.
Clearance system/settlement system
As distributed ledgers utilise shared technology, operational costs decrease, making it easier to acquire faster transactions. These costs include both execution and reconciliation, which can be significantly simplified.
Finance and trading
A distributed ledger employed by blockchain can yield faster and better results than traditional trading methods. It will enable transparency, trust, and security measures in every transaction. The international trade processing costs are stipulated to save $17B to $24B by implementing a distributed ledger system.
Stocks and bonds
Blockchain can decentralise the process of creating stocks and bonds. It makes it easier to acquire securities with the latest technology at hand.
Blockchain streamlines the traditional credit system and handling of loans, optimising the acquiring process. Due to its increased security measures, the operational costs associated with the technology are bound to be low. To sum it up, it makes acquiring loans a more accessible pursuit.
Know your customer (KYC) policy
Storing general customer information and sensitive data optimises decentralised assets. In turn, this paves the way for easier data sharing amongst stakeholders.
Traditional financial and banking institutions are seeing a competitor in blockchain as it offers enhanced security measures. These include digital signatures, timestamping, and cryptographic encryption at the click of a button.
Blockchain has a way of optimising compliance processes by offering to audit customer activity and follow-up. Introducing KYC is also beneficial and makes for a better way to track customer verification.
Access to financial services
A distributed ledger can offer financial services in developing countries instead of traditional banking operatives. This financial inclusion can aid developing countries in creating more efficient systems accessible even from remote locations. It can even increase transparency in terms of land records and government services.
As distributed ledgers and blockchain technology gear up to enter a world of faster and more secure transactions, the global financial sectors are looking out for fierce competition. To understand more about the financial industry's transformation with increasing technological advancements, opt for the SP Jain Fintech certification, which is brought to you by Imarticus.
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It is ideal for professionals who wish to have a good idea of the industry to excel in a competitive workplace. Additionally, you can use it to create a competitive advantage. Enrol now and be a part of the future of finance!