Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
How are Banks Implementing Blockchain?
Blockchain is a perfect fit for the banking industry. Banks currently face several pain points: they rely on highly-specific banking experts and bankers, constantly battling cybersecurity risks and breaches, and their operations are overly complex. However, with blockchain, banks can operate more efficiently by connecting to smart contracts instead of relying on people. Blockchain also solves the issue of cybersecurity by making it impossible to hack. Finally, individual components can be isolated from one another so that if one fails, everything remains operational.
Complexity is the enemy of efficiency, and complexity costs money. Although blockchain technology is complex, it removes large chunks of complexity from the modern financial system. In doing so, blockchain reduces the number of people needed to monitor various operations and the cost of those people. According to Blythe Masters, CEO of Digital Asset Holdings, "Blockchain technology can dramatically simplify and reduce the cost of our back- and middle-office functions."
The blockchain also reduces inefficiencies associated with cybersecurity risks and breaches. The world has no choice but to take blockchain seriously because of its potential to solve central banking problems and bring efficiency to the financial sector.
The blockchain eliminates the necessity of silos by providing a single ledger that contains all necessary information about transactions. Furthermore, maintaining the data distributed across multiple systems by a central party often leads to inefficiency. However, with blockchain, users can create copies of the ledger and update them frequently. It makes it possible to share information with parties that need it and not have to keep it in reserve.
Blockchain technology also reduces the cost of compliance for banks through automation. Because blockchain is a transparent ledger, it allows regulators to see their progress in real-time. There are significant opportunities for banks to use blockchain technology to disrupt other institutions.
The blockchain can also disrupt the $155 trillion derivatives market. Derivatives are investments whose value depends on an underlying asset. According to Bloomberg, "Derivatives hold a huge sway over the world economy, and their prices are determined by complicated algorithms based on multiple factors, including interest rates and exchange rates."
It is estimated that blockchain technology may save banks up to $20 billion per year in settlement times and reduce risk exposure by making it easier to complete transactions. The technology needed for derivatives is similar to a stock exchange, which allows banks to build blockchain solutions for products.
Marketplaces are the third central area where banks may be able to disrupt other industries using blockchain technology. One example is OpenBazaar, an open-source marketplace that uses bitcoin as a currency. The new platform allows buyers and sellers to trade without an intermediary. Nonetheless, this system may be better suited to some industries than others.
Banks may find themselves in competition with bitcoin. As of November 2016, bitcoin had a market capitalization of $12 billion and is proliferating. Ripple has a market capitalization of just $22 million and is mainly used by banks as an internal payment system.
Another way that blockchain technology could disrupt the traditional role of banks in society can be seen through its potential use in the financial sector. Blockchain technology allows banks to compete for the attention of young consumers by creating new forms of digital money that do not exist on paper. Cryptocurrencies like Bitcoin now hold a market share comparable to that of Visa or MasterCard combined.
The blockchain allows banks to provide services such as cross-border transactions and the sending of remittances have the potential to become significantly faster with blockchain technology. It is estimated that 40% of remittances in the world move through Western Union and Moneygram - two companies that can be potentially disrupted by blockchain technology.
Blockchain’s Impact on India
There are many banks that have been established in the world. However, there is one technology that has affected them all and it's called blockchain. The ability to share data across a network of computers is known as a blockchain. It can be replicated and used for the verification of transactions. The "distributed ledger" ensures records cannot be changed without the agreement of everyone on that network.
Blockchain technology can also record each transaction or transfer of the cryptocurrency at any given time, thereby ensuring an accurate public record of economic activity within the system with minimal use of resources while making it more difficult to falsify said records in any way possible.
Some banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. are already investing in blockchain technology for the financial services industry. It's not an easy task to bank on, but it is for sure a great technology that will be used by banks in the future. The use of this technology in banking has a great advantage. And that is the security of the transactions. And it is achieved through the use of cryptography.
This new technology or method can be used to store valuable data which needs to be secured, such as intellectual property, bank balances, and voting rights with there being no central location or data storage system that can be hacked into. There are some banks that have decided to use this technology and its potential in the banking industry. One of them is Barclays Bank. This bank was the first to use blockchain for international transactions involving multiple currencies in a single transaction. The World Bank's head department is currently testing out several projects which make use of blockchain technology.
Conclusion
In conclusion, Blockchain technology has gone beyond Bitcoin. It is highly secure and far more efficient than any other transaction method that existed before it. The potential benefits of blockchain technology are limitless, and we expect to witness many more advancements in the future.
154 Views
