Have a project in mind?Let’s get in touch!
The word “blockchain” has been circulating in the tech world for a while now. It is sort of a buzzword that points out to something significant and, by all means, blockchain is worthy of attention. But, what does “blockchain” mean? What does it do? And, most importantly, where? The answers to these and the other questions can be found in this article. Let’s start!
If we divide blockchain into two words – “block” and “chain”, its meaning will become much clearer. Here, “block/blocks” stand for individual records, and “chain” denotes a single list that links these blocks together. Blockchain is used as a means of recording cryptocurrency (i.e. Bitcoins, Ether, Litecoin) transactions, but it also has other applications. Each transaction of a kind belongs to blockchain and numerous computers (nodes) on the internet validate it. These all-monitoring computers that look out for blockchain transactions are also called peer-to-peer networks. Being decentralized, this system works precisely and never adds invalid transaction blocks to the chain. Every fresh block added to the previous one is generated from its preceding block by cryptographic hash. The latter is an algorithm that takes credentials (the input) and produces the encrypted text (output) of a fixed-size. The very encrypted text is called “a hash”. This process makes the chain complete without breaking it and ensures every block of the chain is recorded continuously. Besides, it is hard to change all the past blockchain transactions as it requires changing all the following ones first. The functioning of blockchain makes it a die-hard system with blocks protecting one another constantly.
Generally, blockchain use cases in banking (and not only in banking) have three different types. These are:
In a public blockchain, there are two most common implementations – Bitcoin and Ether cryptocurrencies. Anyone, who has a decent internet connection can access these cryptocurrencies as easy as pie and validate transactions online being just like a node. So, public blockchain has the following benefits:
However, it is rather costly and not as fast as it can perform on a private chain.
A private blockchain belongs only to one party. It takes part in database management, content management in the company, and auditing. For example, there are such platforms as MultiChain and Eris, which have cryptographic verification and are centralized. Here, the nodes are preliminary determined. Private blockchain has the following benefits:
A consortium blockchain is in-between the public and private blockchains. It may be managed by an abundance of institutions and the process of consensus is predefined by a set of nodes. The ability to read blockchain is restricted or public. For example, R3 and its consortium of 200 members of financial institutions, who develop Corda. The latter is a public ledger platform that works in the banking sector and makes complex transactions. During these transactions, Corda makes access to transactional data restricted.
The consortium has the following benefits:
When it comes to blockchain in fintech usage, the first to come to mind are cryptocurrencies as the digital asset that has been immensely exploited worldwide. As it is known, Fintech belongs to the quick-developing financial industry and produces technologies that help it become better by enhancing banking services and making consumer experience improved.
In fintech, blockchain is the technology that impacts financial industry growth and contributes to the on-going revolution. 77% of the financial sector industry looks forward to adopting blockchain technology as soon as possible. Besides, by changing banking into a seamless and effective experience, blockchain in the fintech industry can eliminate bureaucracy and corruption and save up to $20 million by 2022. All of these possibilities will influence fintech startup competition. Young talents will brainstorm ideas to promote the banking industry and try to obtain as much attention as possible to make these ideas a reality.
By so far, there are four major uses of blockchain in the financial sector. These include:
Based on its use, blockchain has an abundance of benefits in fintech, However, here are only some of them:
Therefore, fintech and blockchain are inseparable and aim at one common future that might give lots of innovations for the fintech industry and attract tech-savvy clients, who already fish for new digital banking benefits, of course.
Also, read about the benefits of blockchain in Real Estate!
Blockchain is still a new technology that has to be fully researched regarding its potential. Last year most of the blockchain startups lost their battle with meeting investors’ expectations. And this is no surprise as blockchain is an immature technology after all. If artificial intelligence, augmented reality, and machine learning will be skyrocketing, blockchain needs gradual development and advancement so as not to fail from the beginning. The reason for taking their time lies in the fact that most of the businesses should be cardinally transformed to meet blockchain and live with it accordingly. Statistics say that by 2023 only some of the organizations, i. e. 10%, will welcome blockchain and transform their businesses beyond recognition to comply with the technology’s requirements.
Check out the latest financial technology trends in the US
What concerns fintech and blockchain, implementation of blockchain in banking will be faster and less complex. Only financial services will gain the desired profit and achieve business value. What’s more, blockchain’s impact on financial services will be budget-enriching by saving costs on transactional operations. Furthermore, blockchain will assist in the creation of newer cryptocurrencies (especially national ones) that will be regulated by monetary policy in every country. Also, approximately now, Australia is deploying a blockchain system to manage the Australian financial market. And that’s outstanding indeed! With such a wide field for inventions and cutting edge solutions, there’s going to be much fintech startup competition to initiate changes and win both media’s and investors’ attention. Blockchain has much to give the banking industry: fast procedures, less cost spending, top fintech security, and transparency that will make this field innovative and prosperous within no time.