Four Ways Blockchain Is Revolutionizing FinTech Industry
The technology that underpins cryptocurrencies is known as blockchain technology. Blockchain is used by Bitcoin, Ethereum, and all of the other 4000 cryptocurrencies, making it one of the most critical contemporary financial breakthroughs. FinTech businesses worldwide are actively partnering with Blockchain Technology Companies in USA, UK, Europe, and building next-gen FinTech apps for their customers.
Here are four ways that blockchain is changing the financial industry.
1. Digital Ledger.
According to Carlos Barbero Steinbock (pictured), lecturer in cryptocurrencies, blockchain, and the fintech business at EU Business School, which offers a major in blockchain in their MBA program, blockchain is akin to an accountant’s general ledger.
Pages in a ledger record time-stamped and annotated transactions, and blocks in a blockchain similarly record transactions. A blockchain can digitally chronicle the complete life cycle of money as it flows and changes hands by time stamping each transaction and recording it chronologically.
“It generates a never-ending chain that goes on and on as long as active individuals are utilizing it,” explains Benjamin Xie, a lecturer at EU Business School. The latter specializes in cryptocurrencies and related themes.
This is critical in the banking and accounting industries, where having an accurate record of transactions is critical.
“You create a life cycle of how money was deposited into the bank, where it came from, how it was spent, and where it went after,” Benjamin explains.
By automatically documenting data, blockchain substantially improves the efficiency of the transaction recording process, lowering the amount of time required to record ledgers and the expenses associated with doing it manually.
2. Safeguards against fraud.
A blockchain is also decentralize, meaning no single entity has power over it. It is unable to change it in any way. Each transaction, or block, is record using distributed ledger technology by a node, which can be any smartphone, computer, or larger server, and there is no connection between the nodes.
According to Benjamin (pictured), this immutability implies that a blockchain can log a comprehensive, unchangeable financial record of every transaction, providing significant fraud protection.
While there is still a chance of a blockchain being hack, such as when someone owns more than half of the nodes in a chain and can validate their transactions, such occurrences are rare.
In 2021, the total value of all cryptocurrencies will exceed $1.8 trillion, with Bitcoin alone worth more than $1 trillion. The crypto market is a great reward for every hacker because it is a fully digital currency compose of code.
However, because of its decentralized structure, Bitcoin has never hack since its inception in 2008 as the world’s first cryptocurrency and blockchain.
“Where blockchain’s largest innovation rests is in the opportunities it opens up in terms of security,” Benjamin explains.
3. Eliminating Intermediaries
Blockchain’s greater security allows it to skip traditional fraud-prevention procedures that require several parties to confirm transactions.
Every financial transaction must be validated by Visa, American Express, or investment bank transaction validators.
“We have up to 12 parties booking and settling transactions at once, so it is pricey,” says Carlos.
Citigroup’s validation process caused a $900 million payment error in 2020.
Because of the decentralized network, this inaccuracy would be impossible on a blockchain. On a blockchain, transactions are automatically vett as they are relate to all network nodes for verification. According to Carlos, this eliminates the need for third parties.
4. Simplifying Money Management
Fintech’s most high-profile use of blockchain is cryptocurrencies, which allow you to keep your money without a bank.
Those who have the keys to the coin are the only ones who can use it. Unlike traditional currency, the money is not held by a bank.
Carlos feels this is where blockchain’s genuine value in fintech may find. “Bitcoin and other cryptocurrencies give people back their freedom and ownership,” he says. “You manage your wealth; you do not have to rely on or trust anyone else with your money.”
Many cryptocurrency owners prefer to store their funds with a custodian, who acts as a bank for their coins. Coinbase is the largest of these platforms, with over 43 million users and a market capitalization of $90 billion. Aside from that, most NFT Development Company employ NFT to keep their blockchain systems safe and secure.
Carlos says this ignores bitcoin’s spirit. “That is hardly financial freedom,” he says. Blockchain could allow everyone to own their own bitcoin money.
