By allowing digital information to be distributed but not copied and that too in a very secure way, blockchain technology created the backbone of a new type of internet.
So what exactly Blockchain Technology is? Blockchain is a technology that promotes trust between trading partners. The blockchain network has no central authority. If you’re familiar with Bitcoin, blockchain is the prime technology that makes it possible to transfer currency and have confidence that transactions are completed in a favorable manner. But banking and other industries are using blockchain (with/without Bitcoin) in a variety of ways. A blockchain is a secure balance sheet or a ledger or a list of transactions. According to Forbes:
- Blockchain records and authenticates each and every transaction.
- Third-party authorization is not required in Blockchain Technology.
- Blockchain is decentralized.
Blockchain Technology is based on two fundamentals:
There are numerous duplications of the ledger. A public blockchain, for example, Bitcoin Blockchain, get published and cloned in multiple places. New transactions get transmitted to a broader network of participants, who add those transactions to the ledger. Ledger is supervised by none, but the system is pre-designed so that everybody’s ledger contains identical information.
A blockchain should maintain a precise history of transactions. Because there are multiple clones of the ledger, it’s hard to alter or delete transactions or add new information that is false. For doing that you’d require to change every clone of the ledger in every location. That would require a successfully hacking number of computers simultaneously which is believed to be ideal.
Did You Know?
- According to the World Economic Forum report, 10% of the GDP will be stored on a blockchain or blockchain-related technology by 2025. Banks are determined to take the opportunity to decrease transaction costs and the amount of paper they process. Implementing blockchain technology would be a great step towards the development of the banking sector by making banks increasingly profitable and valuable.
- According to Harvard Business Review, blockchain will do to banks what the internet did to media. Blockchain technology possesses all the stunning features needed by reliable technology involving money related matters. It is safe, secure, decentralized, clear as well as relatively cheaper.
Benefits of Blockchain
- Feel Secure and Safe: Security is the predominant factor in the financial domain hence it is most popular among the banking sector. Blockchain provides a very high level of reliability and security when it comes to exchanging data, information, and money.It also allows users to take advantage of the clear network infrastructure along with low operational prices with the aid of decentralization. These characteristics make blockchain safe, promising and in-demand solutions for the banking and finance industry.
- Multifunctionality: All major banks are trying out blockchain development services which could be used for money transfers, record keeping, and other back-end functions.
- Less Paperwork: The implementation of blockchain technology can change the paper-intensive foreign trade finance process to an electronically redistributed ledger that gives all the participating individuals, including banks, the ability to access a single source of information. It will also permit them to track all documentation and validate ownership of assets digitally, as an unalterable ledger in real-time.
Some of the Banks that are using Blockchain Technology are:
1. JP Morgan Chase
An American multinational investment bank headquartered in New York City have committed their faith in the future of Blockchain technology.
They have initiated a new division called the Quorum division specifically for research and implementation of Blockchain technology. It is a smart contract platform for enterprises that supports quick transactions and throughput addressing challenges for the finance industry and banks.
2. Bank of America
A major US bank that has filed a patent document which was published by the United States Patent and Trademark Office. The system will allow only authorized participants to access the data and keep a log of all the logging entries.
3. Goldman Sachs
They have invested in a cryptocurrency project called Circle. This project is considered as one of the most well-funded startups in the blockchain space.
Some ways through which blockchain can change the current face of the banking industries are as follows:
1. Fraud Reduction
According to a study, 45% of the intermediaries like stock exchanges and money transfer services are prone to financial crimes routinely. Blockchain is being recognized as the new technology that would reduce fraud in the financial world, almost all the banks are built on a centralized database, these are more vulnerable to cyberattacks because once hackers attack one system they get full access. Implementation of blockchain technology will help them to get rid of them.
2. Know Your Customer (KYC)
These are meant to help reduce money laundering and terrorist activities by having requirements for businesses to verify and identify their clients. Blockchain would allow an organization to access the authentication details of a client by another organization, thus avoiding repetition of the KYC process.
3. Smart Contracts
Blockchains enable smart contracts as they enable storage of any kind of digital information, including computer code that can be executed once two or more parties invading their keys. Contracts could be created and financial transactions implemented when this code is programmed, according to the set criteria.
4. Transparency and Agreement
The tangled web page that record loans and securities cost investment banks billions of dollars to run. Today, this is managed through a myriad of messages and manual reconciliation with the use of Blockchain Technology.
As the final outcome will be fully transparent and publicly accessible, distributed database technology could bring full transparency to elections or any other kind of poll taking. Ethereum-based smart contracts would help to automate the process. For example:
- Boardroom – It is an app that enables decision making to happen on blockchain. In practice, this means that company governance will become fully transparent and verifiable when managing digital assets, equity or information.
Blockchain and distributed ledgers have a bright future. It can help banks not only to reduce the cost of processing payments but also to encourage them to create new products and services that can generate important new revenue streams. Jellyfish Technologies is one of the early adopters of Blockchain and over the years we have developed good competency in developing blockchain based solutions. We are proficient in implementing private blockchains, smart contracts, API integration to Blockchain and other custom requirements. Whether you want POC (Proof of Concept), MVP (Minimum Viable Product) or final product in blockchain, we can help you in cost effective and time-bound manner. If you are interested in Blockchain Development Services, feel free to contact us.