The benefits of blockchain
Blockchain ensures that the data shared among the participants of a transaction is reliable, synchronized and secure. It is incorruptible, secure and transparent, so there are no delayed or missed transactions. There’s also no risk of human error or discrepancies and mismatch in data.
Every transaction is recorded in the central register and every connected distributed register. Jean Chalopin, Chairman of Deltec International said, “Since it’s a distributed ledger, every participant in the blockchain gets the same set of data and sees any updates or changes made.”
When data is stored in different databases, updates on anyone’s record won’t automatically reflect in the other databases. This results in possible data manipulation and duplication. Blockchain doesn’t suffer from this kind of problem. All the participants will have a copy of the same database, so all of them will see the same thing. Data stored in the blockchain can’t be modified. Participants can only add data, so all the changes made can be traced. There will be references to the added data. Participants will be able to see how the data has changed over a certain period. One-way hashes would help validate data if it was modified. Data is also encrypted.
Blockchain in the banking sector
These features make blockchain attractive to the banking sector. Some banks and other financial institutions already started adapting blockchain technology. Here are some examples of how blockchain is refining digital banking.
- Digital Identity Verification – Blockchain allows users to determine how they identify themselves and who to share their identity with. Although they are still required to register on the blockchain, they don’t have to repeat the registration process for every service provider if those providers use blockchain as well.
- Payments – Both commercial and central banks are seeking to leverage blockchain in terms of payment processing, particularly cross-border payments. The cross-border payment process is cheaper and faster with blockchain since there’s no need for mediators or third party authorization.
- Syndicated Lending – Blockchain financial services make the syndicated lending processing more transparent. The process is also faster. Thanks to its decentralized ledger, banks can distribute tasks associated with local compliance to one customer block.
- Credit Reports – Blockchain helps businesses and individuals get a loan based on their credit history. It provides tools that allow borrowers to make their credit reports safely shareable as well as more transparent and accurate. Transactions are encrypted and stored outside the blockchain. Credit reports that are blockchain based help reduce the complexities and costs associated with data verification.
- Hedge Funds – Decentralized crypto hedge funds allow crypto strategists and investors to participate in an open platform. Fund managers within one entity manage traditional hedge funds.
The blockchain is disrupting the finance and banking industry. It is creating a new way of handling financial transactions.
Disclaimer: The author of this text, Robin Trehan, is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.