Blockchain Applications in the Financial Industry
What is Blockchain?
Blockchain is nothing but a collection of database which is used to maintain a continuously growing list of records, called blocks. Each block consists of 2 sections. One is timestamp; it contains the update time information. Another contains a link to the previous block.
The decentralized peer-to-peer blockchain network prevents group of participants or any single participant from controlling the underlying infrastructure. Participants in the network are all equal, adhering to the same protocols. They can be organizations, state actors, individuals, or a combination of all these types of participants.
On functional point of view, a blockchain can serve as “an open, distributed ledger that can record transactions between two parties efficiently and effectively and in a verifiable and permanent way. The distributed ledger itself can also be programmed to trigger transactions automatically.”
The first distributed blockchain was conceptualized by Satoshi Nakamoto in the year 2008. The technology was implemented the following year as a component of the digital currency bitcoin, where it serves as the public ledger for all transactions.
- Distributed resilience & control
- Open source
- Decentralized network
- Security & modern cryptography
- Asset provenance
- Native asset creation
- Dynamic & fluid value exchange
- Reduced transaction costs
- Reduced fraud
- Business process acceleration & efficiency
- Reduced systemic risk
- Monetary democratization
- New business-model enablement
- Application retionalization & redundancy
FinTech, a short term for financial technology, is an industry composed of companies that uses innovation as well as new technology. FinTech companies belong to the banking as well as financial sector. They compete with the traditional financial institutions as well as intermediaries in the delivery of financial services. Fintech companies can be both startup as well as established financial & technology companies. Today this particular industry is growing at a rate of 23 percent per year.
Blockchain in FinTech
The biggest challenge fintech companies face is lack of trust. Making people trust them, as well as making a safe and secure financial product is a real challenge for them. Banks as well as financial companies have huge cash reserve. Using this they create world class secure network on which banking transactions take place. Fintech companies lack fund and this restricts them in developing or procuring high security system.
Blockchain is cheap in terms of developing & also highly secure. With blockchain, a fintech company can manage their financial product easily & securely.
Using blockchain technology, fintech companies are now able to create different financial products with very less budget for serving their customer.
As blockchain is a series of block, companies can track the complete life cycle of financial transaction.