Blockchain in Finance

Is Blockchain the Future of Finance?

13 mins read

Blockchain technology USA

Blockchain technology USA has the potential to revolutionize the financial industry by lowering transaction costs, increasing the speed of transactions, and reducing risk of fraud.

Does this mean blockchain will replace banks? Or will it bring an added level of security and efficiency to financial systems worldwide? In this article, we’ll take a look at what blockchain technology USA is and how it works, as well as how it can be used to improve financial markets today.

What is Blockchain?

Video Caption: Simply Explained

With all these moving parts, blockchain is complex—but it’s also very interesting. A blockchain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. 

The ledger can also be programmed to trigger transactions automatically. For example, a bitcoin transfer from Alice to Bob will result in a new record being added to everyone else’s copy of that blockchain; then everyone updates their own version so that they all match. 

(There’s some debate about whether blockchains are truly immutable, but let’s set that aside for now.) This structure allows individuals and companies (and computers!) spread across different continents to agree on what has taken place during any given period—without any centralized agency.

Decentralized Information System

If a large company like Facebook or Google has so much information about you and your digital footprint, there is a chance for hackers to get into their servers and access your sensitive information. 

With blockchain, information is decentralized; which means that if someone wants to access it, they would have to gain access from every computer in that system – and that’s not possible. Every single piece of data is encrypted with private keys and can only be decrypted by its corresponding public key. 

It would require an almost impossible amount of computing power for someone to hack into all those computers in order to obtain any piece of information.

The more data that’s on the blockchain, the safer it is. 

On a similar note, because blockchain is encrypted with private keys, there’s no way to delete information once it has been entered into a block on blockchain. This makes blockchain a permanent and incorruptible public ledger; meaning there’s no chance for anyone to edit or change any records once they have been created.

Very simple software bugs in smart contracts can cost businesses millions of dollars if exploited. There are many different types of bugs (explained in my book). Do you think companies should be concerned about smart contract security given that most people don’t understand how smart contracts work or what goes into making them secure?

Confidential Transactions

With standard bitcoin transactions, people can see how much bitcoin you’re sending to someone else, but they can’t see who you’re sending it to. This is called public key cryptography, and it creates a degree of anonymity that users don’t get with other payment methods like credit cards. 

But if you want total privacy and don’t want anyone to be able to see what transaction belongs to whom, Confidential Transactions will do that for you. The transactions are fully verifiable—meaning that they still work just like any other cryptocurrency—but they hide where each transaction originated from.

There are no bitcoin exchanges that support it. Yet. But researchers at Johns Hopkins University and Tel Aviv University have built a new Confidential Transaction (CT) scheme, which is currently in its testing phase, so we could see it implemented in future blockchain-based currencies. 

If CT does get implemented into bitcoin or another cryptocurrency, it would be a huge deal for privacy advocates everywhere—because it would mean you could make completely anonymous transactions without sacrificing any security or transparency to do so.

Affordability

When it comes to blockchain, there is a common misconception that its applications are only viable for giant corporations. This isn’t true at all. 

A growing number of enterprises, such as Overstock, Microsoft and IBM are investing heavily in blockchain research and development projects. But what many people forget is that blockchain is also great for small businesses, too. 

For example, with technology companies like V-Nova recently coming out with enterprise-ready blockchains specifically designed for smaller businesses; these offerings eliminate much of the cost associated with developing one from scratch and have lowered barriers to entry considerably over time.

As a result more companies can experiment with blockchain today than ever before.

Applications in FinTech, Health Care, Supply Chain Management, Accounting and Real Estate

According to Deloitte, blockchain in FinTech, health care, supply chain management, accounting and real estate top today’s list of areas where blockchain technology is predicted to have a significant impact. 

Just as cloud computing allowed people to store their data on centralized servers instead of maintaining their own computers and software, blockchain allows transactions to be tracked through distributed ledger technology (DLT). 

This enables participants in a network to have instant access to each transaction’s details as they occur. This ensures that if there are any discrepancies later on in terms of who paid what or when a delivery occurred, everything can be accounted for immediately through data stored on DLT.

Data Encryption

Before explaining blockchain, it’s helpful to understand what encryption is. Encryption technology allows us to secure and protect sensitive data so that only those who are meant to see it can. 

One major benefit of encryption is that once data has been encrypted, it cannot be accessed or altered by anyone else unless they have access to an encryption key – or key for short. 

In blockchain technology, keys serve a similar purpose: encrypting data for storage in a decentralized ledger database structure. But there are some significant differences between how encryption works in traditional database models versus how keys function in a blockchain database.

The Encryption is the only side blockchain that differs from others. While encryption has been around for a long time, it’s become increasingly important in recent years as businesses and governments have come to rely on digital data more heavily than ever before.

 This reliance has led to an increase in cyberattacks, which have resulted in breaches of sensitive data at organizations such as Target, Anthem, Sony Pictures Entertainment and many more.

 With blockchain technology becoming more widely used by organizations around the world – and even being considered by governments for use in identity management systems – it’s no surprise that security concerns are being raised about how secure blockchains really are. But how secure are they? And what makes them so different from traditional database encryption methods?

Digital Identities

In many ways, blockchain technology could create a new digital identity protocol to rival those in place today. While much remains to be worked out, one thing is clear: A blockchain ID system would be more secure than anything we have right now. 

Imagine never having to worry about your banking information being hacked—or being able to access that information securely no matter where you are in the world. Bitcoin made cryptocurrencies possible; blockchain could take them mainstream by making online financial services safer than ever before.

The digital identity system is what makes you uniquely identifiable on a blockchain network. In order to issue a digital asset or validate a transaction, an identity must be verified through biometrics, verification by multiple parties or other means. 

A good way to think about it is that your digital identity is like your IP address on the blockchain. Or perhaps even more like your digital signature. It’s how you communicate with other participants (nodes) and make sure that you are recognized as unique and legitimate for each interaction. 

As blockchain technology continues to mature, we expect many use cases for identity creation beyond simply establishing individual identities on blockchains.

Smart Contracts

These are computer programs that live on blockchain networks and automatically move digital assets—money, in most cases—between parties under certain conditions. 

They can represent just about anything: a deed for a house, a will or trust agreement, a court judgment, even something like a term sheet for an eventual deal between businesses. Each party has access to its own copy of all relevant smart contracts in real time as any changes are made—without needing lawyers or going through official state-based processes. 

Smart contracts have tremendous potential because they provide both security and automation for business transactions at virtually no cost. 

In short, smart contracts could replace huge amounts of human labor currently required to process deals and make sure people don’t cheat one another. It’s not hard to imagine how you might use these kinds of agreements in your own life: You buy a car from a friend who lives across town.

How far do we need to go for full Adoption?

To put it simply, we need to go at least one step further than we already have.

Most companies don’t see benefits of blockchain in finance for an improvement in a product; rather, they want to utilize blockchain for improving their entire business model by adding transparency, immutability and decentralization features to their products.

When asked about how far we are from full Adaptation? Steven McKie, CEO At Cyntient, said that full Adaptation is just around the corner. Till date there are many companies who have successfully implemented blockchain technologies into their day-to-day operations.

Full Adaptation – Second Paragraph: Last month, in August 2018, UAE government announced a deal with United Nations World Food Programme (WFP) for utilizing blockchain technology for managing food vouchers to 2.8 million Syrian refugees residing in Jordan, Iraq and Syria.

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