The Power of Blockchain Technology in Transforming the Financial Services SectorAugust 1, 2018
A blockchain is known as public, digital ledger which anybody can authenticate. It’s distributed worldwide among a network of computers. The key point here is that there’s no need for a chief authority to add new transactions to the ledger. Further, the circulated nature of the ledger denotes it’s extremely secure. That’s because every participating computer on the network requires to validate every transaction and approve on it. The computers utilize a complicated cryptographic algorithm to confirm a presented transaction.
Blockchain technology is an emerging technology which promises to transform the way financial transactions are performed. It’s the driving force behind the internet-based cryptocurrency, Bitcoin.
It’s applications, however, do not end with other cryptocurrencies. Top financial institutions are eager about what blockchain technology can provide for them.
Instant Spot Trading Round-the-Clock
The existing strategy for spot trading isn’t prompt. Although the concept behind spot trading is for instant delivery of the traded instrument, it takes a day or two to resolve most transactions. That’s because of the delay connected with utilizing third parties in every transaction, like brokers. As a result of the participation of such intermediaries, one can’t spot presently spot trade during the weekends.
The blockchain database could get around this issue. It can introduce direct trading between clients which does not necessitate utilizing third parties to resolve the transaction. That denotes trade contractors could be settled instantly. It lessens settlement expenses and offering a highly liquid market always, even on the weekends.
For example, the XinFin hybrid blockchain is considered as one of the most scalable blockchains available in the market. That denotes any business which adopts can anticipate it to perform optimally. At the same time, it also provides all the benefits of blockchain technology involving security in a decentralized setting. XinFin has been adopted already by various major corporations like Obirum and Ramco, enhancing business efficiency. They are only two of sought-after and world-class companies.
Banks are also hopeful about the cost reduction advantages of blockchain technology. A crucial area of banking which the distributed database will save money on is global payments. In conventional banking, global payments could take up to at least four days to settle. The existing architecture outcomes in the necessity for centralized authorities to validate transactions. That verification requires time, and it’s costly for banks.
With blockchain technology, both parties could reach an agreement on the validity of a transaction. There’s no need for a bureaucratic authority. The agreement would be immediate because every bank will have its duplicate of the blockchain ledger.
Blockchains like Ethereum have become sought-after because they present a platform to build decentralized applications. XinFin is made for this function as well. However, it’s a way better than Ethereum and most other platform blockchains available in the market today. That’s because it’s more efficient, faster and cheaper.
There you have it. It’s only two of the many ways blockchain technology can transform the financial services sector. It’s no surprise that some major banks are now searching for methods to administer the blockchain within several years.