In the past few years, the need for blockchain-related development has seen significant growth, and businesses are taking advantage of its potential to achieve more success and greater profit. In the case of the outbreak the hype around blockchain was constantly growing and it was clear that only the smart projects could be able to make it into financial institutions and other services.
The excitement surrounding blockchain app development over the past few years coupled with rapid growth has increased the potential to see early successes. Since the number of usage examples using distributed ledgers is expanding rapidly, companies are looking for innovative technologies to improve their operations.
The bitcoin technology that powered large portions part of the cryptocurrency ecosystem is now paving the path into the financial sector. The business that handles millions of transactions per day, is trying to determine the “decentralized ledger technology in all the transactions across all networks” to transform the financial system worldwide.
Blockchain is known as a tamper-proof system that operates across millions of devices on networks simultaneously, which turns into a fail-safe technology also. The technology makes use of “smart contacts” to automate all business processes as well as the processing of transactions, and has the possibility of reducing the cost of processing.
The Basic Principles of Underlying Blockchain
Here are a few of the fundamental concepts that go along with blockchain technology:
Decentralized Ledger
In blockchain, each transaction ledger is updated at the same time across all nodes involved in transactions as “new block” “new block”. This allows the users to have access to all the data that is available on the ledger simultaneously throughout the entire distribution chain.
Consensus Validation
Before the transaction is incorporated to Blockchain, each transaction has to go through a verification process. This improves the trust of the user while allowing transactions without the involvement of a central authority.
Immutable and Tamper-Proof
Because the transactions are entered only after verification the verification, they are irreversible and also immutable to modifications. It is therefore impossible to make any changes or alterations with the data of transactions without revealing any proof of the identical.
User Authentication using Cryptographic Security
Every user of the blockchain receives two keys to cryptographic security: private and public. Public keys are available to other nodes to verify the transactions as well as other user’s information The private keys are used to “write” access only. This makes it difficult to hack information from the ledger.
Smart Contracts
The transactions that are made in the blockchain are incorporated into the smart contracts that encode all regulations and commercial rules. As soon as the requirements are met, the transactions will be initiated between nodes. For example, the receipt of the necessary documents that confirm the acceptance could result in the loan being released to a client.
Optimizing Fintech through Blockchain Technology
The fact that blockchain is an immutable block increases the potential for the development of an ecosystem that includes Fintech applications. Blockchain technology is changing the traditional financial process with clear procedures that allow for safer and more secure transactions.
When used properly If used correctly, blockchain could create secure Fintech ecosystems that can be used to revolutionize the entire financial industry. Because the financial transactions that blockchain facilitates are not dependent on intermediaries and can be established through peer-to peer network connections that are transparent to facilitate lightning-fast transactions.
But, blockchain-based applications in the financial industry will allow for more than one transparent transaction. By using blockchain technology, people can now have complete control of their funds and transactions to create a open and democratic financial world.
Bankless Financial Management
In the case of large-scale use blockchain allows customers to control their finances and transactions without having a bank’s presence. People who own cryptocurrencies such as Ethereum, Bitcoin, or any other cryptocurrency can store their currency in their digital wallets. The funds inside the wallets are secured by private keys, that have a specific public address for receiving or sending payment from others.
Blockchain technology is the wallet owner who holds their private keys is the owner of their belongings, as opposed the traditional currency system, in which banks were not accountable to hold the cash.
As 2021 comes to an end today, there are approximately 80 million active wallet owners across the globe. This impressive figure indicates that the technology isn’t going to disappear anytime quickly. Carlos Barbero Steinblock, lecturer in blockchain, cryptocurrency and fintech within the EU Business School says, “You are managing your own wealth, you don’t have to rely on or trust anyone else with your money.”
Revolutionizing KYC
Currently, identity verification of transactions is performed by intermediaries and incumbents. With blockchain, the trust component could be the main element of the financial market.
KYC or Know-your-Customer feature works as a single entry of data and will be distributed cryptographically across the network, removing the need for verification or entries. The advancements in blockchain security will help wholesale banks, retail banking investment banking, payment banks the equity crowdfunding market, assets managers and broker-dealers.
Borderless Payments
Another interesting feature of blockchain technology is that it enables transparency and borders-free transactions when using the decentralized currency that is built on its framework. Since the transaction cost is lower in crypto applications, blockchain technology opens the possibility of allowing for speedy and rapid expansion. Since no intermediaries involved in the transaction stage,
A further unique feature in blockchain technology is the fact that it enables transaction without borders via the decentralized currency which makes use of its infrastructure. The technology could also open the way for quicker and easier payments because it costs less to transfer funds between accounts. Because blockchain transactions don’t require approval from middlemen and banks don’t need to use facilities to make transfers, charges for processing international payments are significantly lower as well.
Blockchain technology will open the way for a smoother circulation of money around the world. Typically, banks charge 10 percent to 15 percent of the money transferred as a remittance charge However, using blockchain, this number can be reduced to 3 percent.
Blockchain transactions, as we’ve mentioned before they are also very secure as all participants in the chain’s transactions need to sign off on the transaction to take place Anyone can look through the ledger’s updated version for specifics of the transfer.
In addition, since there’s no requirement for third-party intermediaries in order to move funds around, it’s possible to use P2P transfer to boost transactions. This lets banks rival fintech start up and create their own suites of fintech products.
The Key Takeaway
Fintech has become an influential factor in the evolution of the traditional banks. This has meant that the last decade has witnessed us move more quickly towards a cashless society and a wealth of investment options and ways to store our wealth than we have ever. However, the advent in blockchain app development technologies is expected to accelerate the growth of fintech, paving the way to truly open up finance and allow for people to manage their money without the need for middlemen or large institutions.
