The key factors that blockchain has over traditional systems are shortened confirmation time, reduced cost, and increased trust between parties. Create account in platforms like auto-trading bots that use fundamental and technical analysis to provide you with the best trading calls. Therefore, to understand what makes blockchain such a promising technology for the financial segment, one first needs to understand the features of blockchain and its application in a finance setting
The goal of the below-mentioned portion is to highlight the key components that make blockchain such an exciting technology for financial workflows and will provide some examples of current implementations.
Arguably, blockchain must be considered one of history’s most significant technological breakthroughs. It’s distributed, immutable, and cryptographically secure. All data are stored on multiple devices dispersed worldwide, providing robust security from hackers and illegal access to personal data. Having these properties makes blockchain unique for several different industries. Finding a problem domain where users cannot effectively apply this technology is relatively rare.
It might come as a surprise, but the financial industry is one of the most visible markets to adopt blockchain technologies. It is because the digital revolution has been present and arguably more visible in almost every facet of people’s lives than ever before. With innovations, it seems like everything is speeding up, affecting not just everyday consumers but companies as well, especially in roles such as middle management and finance professionals, where there is a significant change to how we do business.
One of the most recent implementations within the financial industry is that of blockchain-based money transfers. Banks have teamed up with Ripple or a similar provider in this scenario to enable instant, frictionless payment between two different entities. But unfortunately, the check system that we currently have today can take weeks or months to settle or bounce, furthering delays and costs in the financial industry.
Another modern implementation in the financial sector is smart contracts. These complex digital agreements can eliminate numerous transaction intermediaries and significantly reduce business operating costs.
A blockchain is a disruptive machine steadily making its way into the financial industry, and it’s easy to see why. With the attributes of decentralization, transparency, and security, blockchain has the potential to change how transactions in every sector are done business.
Blockchain is currently being used in many industries for many different purposes. For example, insurance policies made via blockchain make it possible to take out coverage without involving third parties or entering onerous contracts. If anything goes wrong, there will be immediate verification that the coverage is valid and fully active. In addition, blockchain allows for democratic voting and prevents fraudulent activity.
Another example of a blockchain-based system is for tracking goods along the production line. Since everything that goes into the system must be verified via blockchain, this provides a traceable chain of custody from the factory to the warehouse to the retailer.
By putting into place an intelligent contract system that is used with blockchain, it becomes possible to eliminate the middleman from many transactions and provide real-time auditing and payments. It is beneficial in areas that require international transactions with a high degree of transparency and security.
One of the biggest appeals of blockchains is that it provides real-time updates from all parties involved in an exchange. Even if you have to clear through a bank, there is always a lag between the transaction and its verification. Blockchain systems operate in an almost real-time system that can be directly verified by all parties involved.
Blockchain’s biggest appeal to finance is that it can provide currency exchanges without any trust in third parties, with the option of peer-to-peer transactions and exchange rates that are much more competitive than current financial networks. With such a simple structure, the transaction costs drop significantly while at the same time improving trust between all parties involved.
No contractual failure:
With smart contracts, blockchain can handle even the most complex business transactions within a network. No single party can wash their hands of the contract and walk away from it in such a system. It operates whether any party is trustworthy or not, rewarding those who are honest with higher pay-outs and penalizing dishonest players for cheating the system.
Blockchain technology is one of the greatest innovations in IT history, yet it’s still not fully understood and can continue to evolve by becoming more quickly adopted. There are many ways that companies in finance can use blockchain systems.