Blockchain refers to a technology that helps to maintain the record of all the transactions of a currency in a detailed form. There are no centralized records maintained for these transactions, and they are decentralized in nature. This helps all the players to maintain the record of all the transactions with themselves. The transactions are stored in the blocks keeping the records of all the currency in a detailed form before the currency even reached the user’s wallet. The records of all the operations are maintained in a public ledger so that everyone can access them and see them whenever they want to. For example, in case you are receiving a dollar, the block is going to maintain a record of the usage of the dollar.
Use of Blockchain in Financial Industry
Blockchain has come out as a technology that has the potential to dislocate the financial industry that is used on a daily basis in the transactions of businesses. You can earn a great sum of money by bitcoin investment which is another method from which financial industry is benefitted. Let’s understand what can be the impact of blockchain technology on financial sectors.
The payment mechanism gets enhanced by the Decentralised system.
The concept of blockchain transactions is completely different from centralised or traditional systems. In traditional payment systems, contracts or deals are made when any central authority meets a specific criterion. This isn’t the case of blockchain transactions, as it allows the two parties to make and complete the agreement and store all the contracts in its distributed public ledger without allowing any intermediary to involve. Payments get completed in no time, and definitely, it is a smart way to complete the agreement.
There is great potential in blockchain technology to regulate the mechanism of real-time payments, which is beneficial for businesses and companies. It provides fast and cost-effective techniques to complete the financial transactions without looking upon central authorities to settle the contract or clear it. But still, in distributed ledger mechanism, it has been observed that there’s a delay in clearing or settling the transactions or funds and also a sense of customer dissatisfaction. The outcome of this may be that customers seek the development of new technologies to offer better solutions.
Therefore, it is imperative to understand how blockchain technology works and how it to process payments to understand it in depth with example. For instance, a person named ABC wants to transfer funds to another person named XYZ. The transaction is gathered into a block, and the other information required to complete the transaction gets connected to validate the transaction to get approved. As soon as the transaction is verified and validated, the money gets transferred to XYZ. Therefore the transaction gets recorded in a distributed public ledger in a sequential manner.
By checking the above instance, it is clear that no central authority’s approval is required to validate the transactions, which are the main benefit of the blockchain mechanism.
With blockchain technology, not only the exchange sector has benefited, but the financial economy has also grown. Even though its powerful mechanisms it has the potential to renovate the bitcoin trading platform. Businesses used to do bookkeeping to maintain the records of ownership. Still, with the introduction of this digital ledger, the trading sector has been boosted, and there’s no requirement to pay hefty costs in order to maintain the books and validate the transactions record.
There isn’t any requirement to maintain similar records of intermediaries, brokers, settlement and clearing houses, and brokers. The public ledger facilities the two parties that require completing the transaction to access their data at the same time. This makes the entire process must easier, smoother, and transparent.
The duo of blockchain and Fintech
Businesses can grow by using the duo of blockchain and Fintech as it adds to the core value of businesses and organisations. Suppose the duo is implemented with great planning. In that case, it helps by assuring data integrity, providing financial contracts evidently, and computerising the laborious records with blockchain technology, which will help track the ownership source. Not only in businesses but blockchain technology can provide ultimate benefits to the banking sector as well.