Cryptocurrencies & their blockchain technology are being promoted as the booming thing in the globe after the invention of the internet. The finance sector will be facing the major impact of technology. The blockchain, as a form of DLT (distributed ledger technology), can modify well stabilized financial organisations and bring faster transactions performance, lower costs, auditability of operations, improved transparency & other benefits. The promise is held by Cryptocurrencies of a new local digital asset class without a central administration.
So, what the development in technologies mean for multiple players in the finance sector or the end-users? “Blockchains can dismiss any business action established on transactions transpiring on old corporate databases, which is what holds nearly every financial service action. Any financial transaction that holds weak transparency & restrained traceability is unprotected to agitation by blockchain applications. Hence, Distributed ledger technology is both an excellent opportunity and also a destructive threat,” stated by Bruce Weber, business administration professor, and Andrew Novocin, professor of electrical & computer engineering, at the University of Delaware.
Blockchain technology has declared to be a game-changer with the potential to demolish more boundaries in the upcoming future. However, a few obstructions need to be dealt with before it can govern the financial sector completely by obtaining the “number one” currency rank for financial services. Many big guns in the world of finance are trying to uphold blockchain technology for extensive acceptance as a means of exchange in all the business transactions.
Blockchain technology ledgers have productive and innovative benefits over conventional approaches which promote bilateral settlement by excluding intermediaries failures, collateral costs, delays, faster implementation of transactions, minimize credit risks, enhanced transparency in operations, amongst the others. A blockchain in easy terms is a series of correlated blocks comprising of a record of data maintained by computers and not controlled by any particular entity secured by applying a cryptograpy principle. Blockchain technology comprises three main properties, such as Transparency, Immutability and Decentralization. In a decentralized system, the information and data are stowed by various entities and each one in the networks holds the data.
Within the last 5 years, technology has evolved for enterprise-grade use explaining the following advantages:
Security: Its scattered consensus-based architecture excludes single points of failure & decreases the requirement for data intermediaries such as messaging system operators, inefficient monopolistic utilities and transfer agents. Ethereum also allows implementation of secure application code meant to be tamper-proof against malicious and fraud third parties— making it virtually difficult to manipulate and hack.
Transparency: It uses mutualized rules, shared processes, and protocols, working as a single assigned source of trustworthiness for network participants
Trust: Its immutable and transparent ledger executes it easy for various parties in a business network to manage data, reach agreements and collaborate.
Programmability: It encourages the execution and creation of smart arrangements— tamper proof, deterministic software that automates business logic – creating enhanced efficiency and trust.
Privacy: It offers market-leading tools for granular data secrecy across all layer of the software pile, allowing careful sharing of data in company networks. This dramatically increases transparency, efficiency and trust while maintaining confidentiality and privacy.
High-Performance: It’s hybrid and private networks are managed to support hundreds of transactions per second & periodic breakers in network activity
Scalability: It promotes interoperability between public and private chains, providing each business solution with the global reach, high integrity and tremendous resilience of the mainnet
Collectively, these advantages result in more efficient business models, more accountable transparent governance systems, greater liquidity, lower costs of capital, improved incentive alignment between stakeholders, reduced counterparty risk, access to a broader investor and capital base, and access to all other digital financial instruments.