A range of industries including manufacturing, real estate, finance, retail and others have been significantly influenced by blockchain technology. According to the recent Forbes report, business giants like IBM, General Electric, BMW, Microsoft, Facebook, Google, Nestle and many others have already adopted blockchain technology to accelerate business processes, save cost and boost transparency. Financial software development services that use blockchain help businesses stay relevant and maintain a competitive edge in this digital era. Go on reading to learn why blockchain is going to conquer the world and how your business can benefit from implementing this technology.
The Pros and Cons of Blockchain
Blockchain is a technology that makes the record of a digital asset unchangeable and transparent by employing decentralization and cryptographic hashing. Basically, blockchain is an alternative for the traditional database. However, blockchain is different from a database. While a database demands a central authority to manage the data, blockchain allows for a decentralized approach to data recording and validation. Admittedly, blockchain has its both benefits and drawbacks. Let’s cut to the chase and take a closer look at them.
While a conventional database relies upon one or several servers and is sensitive to technical failures, blockchain data is stored in multiple devices. Every network node can store a copy of the database, so it’s impossible to hack and modify the data. In addition, the distributive design of blockchain removes the need for data intermediaries.
Blockchain technology allows for interaction between private and public networks, providing solutions at different levels.
Increased trust and transparency
Blockchain functions as a single shared source for all members of the network, ensuring transparency of each process. Blockchain is distributed, decentralized, and peer-to-peer monitored. As blockchain data is immutable, it encourages higher trust and gives potential to effective collaboration among businesses.
Blockchain makes it possible to carry out multiple transactions in a second.
Blockchain enables selective data exchange in business networks, ensuring complete privacy where you need it.
As we have already mentioned, data immutability is one of the major benefits of blockchain as it ensures stability and transparency. However, it might be a drawback as well. Once written, the data can’t be removed from the blockchain, presenting a privacy issue.
Danger of the loss of private keys
To access their blockchain data, users need private keys. In case a user loses or forgets the key, the data is lost, and there is nothing that can be done to fix this issue. No centralized authority can be responsible for private keys updating, because it will ruin the principle of decentralization.
Blockchain ledgers are very likely to get larger over time. At the moment, the Bitcoin blockchain needs approximately 200 GB of storage. Firstly, It means increasing the number of hard drives. Plus, there will be a risk of losing nodes if the ledger gets too large to download for any individual user.
How Blockchain Will Help You Beat Your Competitors
Blockchain offers a range of improvements in financial technology. Leveraging its enormous potential will definitely give you a competitive edge over other businesses. Let’s have a look at the major advantages that blockchain offers to Fintech.
1. Blockchain Provides for Immediate Settlements
With blockchain, it takes no more than a couple of minutes (or just a few seconds, it depends) to carry out a transaction. The settlements are user-optimised, which saves time for either party that is involved. Transactions settle immediately, and there’s no need for participation of the middle office or back office personnel in banks. According to the Forbes report, Broadridge Financial Solutions, a public corporate services company based in New York City, has implemented blockchain software to automate the middle office processing of transactions. The company also plans to start concluding bilateral repurchase agreements on the blockchain by the end of 2020.
2. It Strengthens Financial Security
Blockchain securely stores all the transaction data and fully protects it, eliminating the risk of fraud as well as post-factum cancellation. Also, this technology enables storing the record of each identity, its financial reputation, credit scores, and securely sharing the required data. This means that it’s easy to make a decision whether to trust the user or not.
3. Blockchain Technology Helps to Cut Down Cost
With blockchain, you don’t need a trusted third-party as it allows for peer-to-peer transactions. As a result, the financial industry can do without fee-charging third parties, and it means essential reduction in operational costs. For instance, a $5,000 international transfer can cost around $100 including different fees and currency exchange losses. On the contrary, the same transfer using blockchain costs less than $1.
What is more, if several financial organizations share a blockchain, they gain another advantage. Obviously, the overall cost of blockchain in that case is greater than individual cost. Still, the expenses are evenly distributed among all participating organizations, ensuring a significant decrease in cost.
4. It Offers Greater Transparency
Blockchain ensures transparency among financial institutions. In addition, it greatly enhances regulatory reporting and monitoring processes. For instance, as reported by Forbes, among other uses, China Construction Bank utilizes blockchain to trace the origin of pharmaceuticals, to monitor carbon credits, and to track how government grants are spent.
5. It Eliminates Errors
One of the core benefits of blockchain is that no recorded data can be changed. All the data can be monitored in real-time with a comprehensive audit trail. This way, it greatly cuts down error handling. Citigroup, a financial services corporation headquartered in New York City, uses blockchain software to automate the matching and reconciliation of equity-swaps derivative contracts. By implementing blockchain, Citigroup expects to cut down errors and reduce disputes over the valuation of assets.
6. Blockchain Allows for Smarter Analysis
Blockchain makes it possible to analyse bigger amounts of data and get more accurate screening results. This feature greatly facilitates the ability of the Fintech industry to provide better service. And this always means driving more customers and maximizing profit.
7. You Can Get Better Contracts Experience
Blockchain has triggered the appearance of some other related inventions, like smart contracts. In a nutshell, smart contracts guarantee that the commitments are met before a contract or transaction is concluded. Actually, smart contracts execute automatically as soon as the conditions have been met. Foxconn, a Taiwanese electronics contract manufacturer, uses smart contracts to automate transactions. They report that their annual financing costs have dropped from 24% to 10%, and, in addition, the transaction time has been reduced from a week to a single day.
To Wrap it Up
In essence, blockchain is a really promising revolutionary technology. It helps to significantly reduce risk, eradicate fraud and it also offers high levels of transparency and decentralization. Blockchain makes financial processes safer and faster, enabling you to provide your customers with a more streamlined and beneficial transactional experience. Don’t miss out on this huge opportunity to grow your business and outperform your competitors.