January 28, 2021
How Can Blockchain Technology Transforms Finance?
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How Can Blockchain Technology Transforms Finance?

It became one of the main questions for researchers, giant banks, central bank officials, and financial institutions that how can blockchain technology transforms finance? Many institutions and start-ups answered to that question. They all mentioned four main cases, which we are going to explain in this article.

 

An infrastructure for cross-border exchanges

As we know, the technology transformed the world, especially finance sector. The main reason is that financial institutions they all use technology and Internet nowadays. One of the main usage of technology for the financial institutions were to build a data center since 1970. After a while the Internet technology revolutionized all the sectors and finally the mobile applications appeared in the market. Although, it could be a great achievement, the international financial transactions were still facing serious challenges and obstacles. Many businesses are running around the world, which they need to have financial transactions with each other. But, banks are still using the traditional methods to transfer funds. So, the world was facing with the problem, which blockchain could be a solution for it.

Blockchain technology in financial exchanges

Statistics show that most of the financial institutions and banks use private centralized data base. Although, the technology could improve it to some extent, still we need a better solution to overcome the existed challenges.

Blockchain technology makes the financial institutions and businesses be able to connect with each other directly without using the banking system. By using blockchain, they can easily perform international transactions without any middle-man interfere. In fact, blockchain performs much better than the existed financial network. All the transactions on the blockchain network could be performed peer-to-peer without using any third-parties.

How Can Blockchain Technology Transforms Finance?; Digital assets

The term digital asset born by introducing Bitcoin based on blockchain technology. Bitcoin is introduced as the first successful cryptocurrency to the world. It has features, what makes it stay apart from other assets. In fact, blockchain technology gave these unique features to Bitcoin such as transparency and decentralization. In addition, it prevents “double spending”, which traditional banking system is still facing this problem.

How Can Blockchain Technology Transforms Finance?; Market

Blockchain has the potential to be something beyond a data base. It also could be used as a platform, which provides efficiency to perform all kind of transactions. Nasdaq was one the pioneers in this sector, which used blockchain for stock trading.

Another famous and successful example is Ethereum. Ethereum provided blockchain-based smart contracts for the first time. Now, many other tokens and coins are running on Ethereum blockchain.

Transparency and adaptability of blockchain technology

The main feature of blockchain is the transparency. In a public blockchain, all  members of the network can track all the transactions and data on the network. This feature helps, when providing data to regulators and authorities is necessary. For example, some financial institutions have to provide reports constantly to the banks, which they are working with. This process is necessary because those financial institutions should prove the eligibility of their transactions. By using blockchain, this process would be much easier, because all the transactions verify, record and store on blockchain.

In addition, all the data stored on the blockchain network are unchangeable. For that reason, it could be helpful for accounting and auditing the financial condition of institutions and businesses.

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