The Growth And Surging Popularity Of Blockchain Technology And Its Advantages Have Garnered Interest From Diverse Industries Across The Globe. Among These Industries Taking A Keen Interest In Blockchain Technology In The Financial Industry.
Blockchain At Its Inception Was Originally Conceived Based On Cryptocurrency, However, Some Other Aspects Of It Can Reach Greater Heights. Blockchain Technology Systems Have Several Features That Are Highly Beneficial To The Banking And Finance Industry. Such Systems Are Decentralized And Do Not Require A Centralized Server To Perform Transactions On The Blockchain Network. The Decentralized Nature Of Blockchain Eliminates The Middle-Men Present In The Traditional Financial Systems And Ensures That Trust Is Established Between Business Participants Without The Assistance Of A Third-Party.
In The Financial Sector, Blockchain Is Utilized In Managing Business Operations Ensuring Safe And Trustworthy Notions Of Agreements For Carrying Out Transactions. A Key Feature Of Blockchain Technology That Is Highly Beneficial To The Financial Industry Is “Smart Contracts”. Smart Contracts Are A Set Of Computer Protocols And Algorithms That Control The Verification And Execution Of A Contract. These Smart Contracts Eliminate The Difficulties Experienced In The Traditional Financial System Such As Delays In The Transaction Process, Obscurities In The Contract, And Dependence On Middle-Men To Follow Through With Their Commitment. They Are Also Immutable And Can Enhance Integrity Between Participants By Ensuring That Changes Cannot Be Made To The Contract By Either Participant During The Transaction Process.
Here are other applications of blockchain in finance:
1. Security: The Distributed System Employed In The Blockchain Network Contributes To The High-Level Security Of Operations Carried Out On The Network. The Absence Of Middle-Men Eliminates The Possibility Of Failure Which Is Common In The Traditional System.
2. Efficiency: Applications Running On The Blockchain Network Function At A High-Level Speed. They Are Designed To Handle Hundreds Of Transactions Per Second And Can Be Programmed To Solve The Most Complex Problems.
3. Transparency: As Discussed Above, Distributed Networks Provide Complete Transparency To Business Parties, Unlike The Traditional Method That Involves The Dependency Of A Middle-Man To Fulfill Their Commitments. It Makes Use Of Guidelines, Standards, And Protocols To Provide Trust And Transparency Between Participants.
4. Instant Settlements: With Blockchain, Transactions Can Be Performed In Seconds. The Introduction Of Blockchain To The Banking/ Finance Sector Will Eliminate The Need For A Significant Number Of Staff Necessary For Processing Transactions In The Traditional Banking System. Hence, Reducing Delays And Aberrations In Processing Contracts That Keep Customers Happy.
5. Payments: Digital Currencies Running On The Blockchain Network Have Proven To Be Useful In Transferring Both Domestic And International Funds. This Particular Application Of The Blockchain Has Generated A Lot Of Discussions Among Local Banks Because Of The Massive Amount Invested In Centralized Systems. Cryptocurrencies Such As Bitcoin And Ethereum Are Well-Known Digital Currencies That Can Perform Payment Activities On The Blockchain.
The Bottom Line
Blockchain Technology Has Garnered A Lot Of Attention From Industries Across The Globe, With The Finance Industry Taking A Keen Interest In Its Application To Its Operation.
This Article Discussed In Detail, How Blockchain Has Been Useful In Particular Aspects Of The Finance Sector.
