Blockchain is one disruptive tech that has come to revolutionize the financial sector. Popular cryptocurrencies such as Bitcoin and Ethereum are powered by blockchain. This is a shared digital ledger book that permanently records crypto transactions. A network of computers verifies blockchain transactions without any need for a central controller. And advanced cryptography is used to secure the data flowing through this network. As of 2021, the combined value of crypto is over $1.8 trillion. It is no surprise that blockchain tech is changing finance, and discussed below are a few ways how.
Blockchain promises to transform supply chains and trade finance, creating exciting new opportunities for smart contracts. Existing supply chains are complicated and slow as they involve several parties, who often don’t trust one another. These call for intervention from central authorities such as banks and clearing houses to act as middlemen. With blockchain, smart contracts can be executed automatically, and titles transferred without the requirement for banks. Supply chains could be traced back to their sources. By cutting out middlemen, costs (fees) can be reduced.
The world’s payment sector is big, yet it is not that efficient, secure, and fast. Money laundering often arises from financial transactions not being publicly traceable. Blockchain offers seamless payment solutions to boost international money transfer services. In recent years, top banks like Santander have started adopting blockchain tech to release payment apps and enable customers to make international payments 24/7. This is only the first step of the blockchain revolution – the technology will eventually allow banks to offer real-time payment services and reduce operational costs and human error.
Protection against fraud
As a decentralized digital ledger, the blockchain has no central authority. Once a transaction is recorded, it’s immutable. Distributed ledger technology allows the blockchain to allow each block to be recorded via a node, a computer, large server, or smartphone – there is no link between the nodes. The immutability of the blockchain means that it can log unchangeable records of all transactions, providing a high level of protection against fraud. When there is accountability and transparency in financial transactions, fraud can be checked.
Democratizes money management
The primary high-profile application of blockchain tech has been spearheaded by cryptocurrencies, allowing people to keep money without any bank account. Investors who trade cryptocurrencies often use digital wallets for securely storing crypto. Wallet holders use private keys to send and spend their coins; a public address makes it possible for you to receive crypto payments from others,
The owner of a private key is the only person who can access a crypto coin. Bitcoin and other blockchain-powered digital currencies provide freedom for people to own and manage their wealth. However, the risk of keeping money this way is that when you lose your private key, you can’t retrieve your funds.
When people completely take control of their finances, that could take a considerable toll on traditional banks. Blockchain impacts the fintech industry in diverse ways, but disrupting the conventional idea of banking institutions is one area that feels the most significant change.