Blockchain Solutions In Transforming Finance
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Security of data and monetary assets are the vital requirements of people around the world.
Current technology overhaul has induced artificial intelligence and machine learning to the financial service sectors. With such digitization of services, cloud security and data encryption serve as the key elements for organizations to stay on top of their expanding cloud footprint.
Alongside the digital technological advancements applied by the organizations, blockchain is a major change for the financial sector.
Blockchain provides advanced cryptography to ensure unmutilated secured transactional ecosystem.
The blockchain technology market share is expected to increase by USD 6.25 billion from 2020 to 2025, and the market's growth momentum will accelerate at a CAGR of 32.39%.
Blockchain has the potential to transform a traditional finance system into a valuable trustworthy and efficiently faster network at lower costs.
A Decentralized Network Solution
Blockchain works as a decentralized distributed ledger involving blocks of data containing information which are linked to each other through cryptographic hashes. Manipulation of data or bypassing security is almost impossible on following such cryptography.
As per Ben Samaroo, co-founder and CEO at WonderFi, which is a decentralized finance platform,
The institutions that adopt this new technology first will be able to streamline internal processes and provide their customers with lower-cost financial services, effectively beating their competitors on cost to capture a larger portion of the market.
Transparency of Data
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A public/private ledger distributed among publicly/selected participants of a network, blockchain enables transparency of transactional data conferring to immutability.
Adding trust to the financial structure of an organization, it remains in compliance with the strict regulations (PCI-DSS compliance, EU’s GDPR law, HIPAA Security Rule for the healthcare industry, and others).
Transparency works in such a way that the transaction or bundle of transactions are stored in structured blocks connected to each other which further ensures that even a minor change would create a fraud alert to the participants.
The network participants hold their own private keys which serve as a digital signature in validating transactions. In case of record alteration, the signature would be invalid as well notifying the peer network.
Enhanced Security
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Frauds are the major element causing severe economic losses for organizations, sometimes unable to trace or backed by top level individuals. In traditional finance system, it was often easy to have corruption lingering within leading to mistrust and downfall.
Blockchain enables FinTech to run smoothly in implementing organizational growth through automation and AI, without any disruption or failure. As blocks of immutable data ensures uniqueness to the process of hashing, two or more transactions are combined to create a specific hash for a block.
Once such hash is created, it cannot be reversed in the process. This root hash thereby creates a hash tree encoding the blockchain data in an efficient and secure manner.
Faster Transactions
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Blockchain further supports real-time domestic or cross border transational facilities at a much lower cost.
The existence of a hash tree significantly reduces the consecutive levels of hashes required to be performed, leading to faster verifications and transactions. Faster processing depends on various other factors as in network traffic, number of active users or the size of each block of information.
Typically users prefer faster transactions within few seconds without realising the amount of load currently the network has to handle at that point of time.
Cost Efficient Soluions
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After everything, cost effectiveness worth more at times where it even ensures advanced security.
Blockchain efficiently eliminates the existence of third parties through which a transaction is supposed to happen. This leads to reduced cost for an organization along with the time invested for verifications and other hectic involvements.
As per the joint analysis by Accenture and operations-benchmarking leader McLagan applies real-world banking data and operating models to assess the prospective value of distributed ledgers,
Blockchain technology could reduce infrastructure costs for eight of the world's 10 largest investment banks by an average of 30 percent, translating to $8 billion to $12 billion in annual cost savings for those banks.
