The financial system has evolved from analyzing traditional ledgers to providing digital solutions like online banking and mobile applications. With this, it is not surprising that commercial banks around the world enter the race for the latest technology in vogue: Blockchain. Financial institutions are increasingly betting on this technology to once again revolutionize the financial system.
The reason that banks and financial institutions are so interested in blockchain lies in the competitive nature of the banking system, in addition to the growing demand for a faster and more efficient service. In order to keep pace with society, which increasingly seeks to meet its needs instantly, financial institutions seek to adapt to the demand for greater agility, new products and services. However, the sectors own needs, such as security, continue to be a priority and a challenge in the face of the threat of cyber security and hacking.
What is blockchain?
The blockchain is often described as a decentralized account book or a database replicated in a peer-to-peer network. In other words, this technology is essentially a new type of storage that allows all of its users to share a database and make modifications safely.
Unlike other more traditional options, in this storage system the data has been duplicated thousands of times through a network of decentralized computers (the peer-to-peer network) independently.
With this public and decentralized network, transactions are protected and carried out under a blanket of total privacy. Data protection is achieved through encryption of the information in the transaction link. These transactions are based on digital accounts or wallets that grant participants anonymity through their digital identity.
The system works under the consensus of the participants, conditioned that each version of data corresponds in its entirety with the information shared in the database. This eliminates the need for a central authority and puts control in the hands of the participants, which means that any inappropriate changes to the database will be immediately detected by all participants, making this process an immutable audit mechanism.
Blockchain technology, also known as blockchain, was developed as an underlying bitcoin technology that aimed to record and verifies cryptocurrency transactions.
The blockchain has achieved its own place thanks to its potential as a disruptor of the centralized system and to speed up until now more complex processes, and despite the fact that the evolution of bitcoin has been erratic; other cryptocurrencies are also attracting attention thanks to this technology and the advantages it offers.
Blockchain has the ability to accomplish this thanks to the nature of its design – a collection of distributed, shared, secure, and immutable blocks. Each block of information is distributed to all the participants (nodes) in the network, which guarantees an exact replica to prevent the undue alteration of information.
For a transaction to take place, its validity will have to be verified by each of the nodes in the network, and the information will be recorded and shared transparently within the chain.
This is what makes blockchain attractive to financial institutions. To understand how blockchain will fit into the needs of the modern world, it is convenient to take a step back and analyze the relevance of this technology in various sectors of the economy.bitcoin-champion.com is good site which guide you about the bitcoin currency.
The use of blockchain in banking
For banking, the use of the blockchain offers potential benefits for fraud prevention and even for the elimination of some human errors. In the technical aspect, the validation, protection, coding, distribution and tracking of data and transactions are the main attractions of this technology. The blockchain is already considered a transformative agent for the areas of settlement and clearing, international transactions, commercial financing, identity verification, and loan management.
Since blockchain technology is not restricted by international regulations, its implementation has the potential to transform the banking sector and turn it into an industry of cooperation between financial services institutions and Fintech companies, as well as promoting digital cooperation and innovation, the evolution of new business models and a more competitive banking.
So, bitcoin is not enemy of the banking sector, but it makes the things easy for the users.