The innovative blockchain in the global financial system has addressed current loopholes and inefficiencies. Who wins in such a competitive technological race?
Harvard Business Department once reviewed the blockchain in the global financial system “ The Internet of Everything needs a Ledger of Everything”. Blockchain technology that has built up the much-hyped bitcoin ecosystems is widely spreading its influence in the financial industry. The industry, which witnesses trillions of dollars in transactions every day, is now experimenting with blockchain.
The notion of a “decentralized record of all transactions throughout the network” may be used to renew the global financial system. Blockchain in the global financial system is marketed as a tamper-proof system that operates concurrently on millions of devices over a fault-tolerant network. Smart contracts are utilized in the technology to automate the recording and processing speed of transactions, which has the ability to save intermediates’ fees.
How does the global financial system revolutionize thanks to blockchain technology?
5 basic principles of blockchain technology
Blockchain in the global financial system is normally renowned with the bitcoin event as a first-successful digital token in the financial industry. In theory, blockchain are defined as a decentralized ledger storing a database in connected blocks. Not only bitcoin but also financial services like insurance, banking, stocks are utilized with the following 5 basic competitiveness of the blockchain system.
- The Decentralized Ledger (DLT): a type of distributed digital ledger in which every transaction is updated as a new ‘block’ across all nodes at the same time. This allows users across the distribution chain to have opportunities to get access to the same information at the same time.
- Consensus Validation: Any transaction in the blockchain must go through a predetermined validation process. Even without a central authority, this system may enable participants to have faith in their transactions
- Tamper-proof and Immutable: Only transactions that have been validated are added to the chain. Once a transaction is recorded in the blockchain, it is irrevocable and unchangeable. As a result, no one can tamper with the database without leaving proof of their actions.
- Cryptographic Security for User Authentication: Each blockchain user is issued two cryptographic keys: a private and a public key. Only the public key is accessible to other nodes to assist validate requester details, while the private key is utilized for ‘write’ access. It’s nearly impossible for identities to be hacked or data to be stolen thanks to the cryptographic security of user access.
- Smart Contracts: What are they and How do they work? Smart contracts, which encapsulate all of the commercial and regulatory requirements in blockchain transactions. Once all of the prerequisites have been satisfied, transactions between nodes are initiated. The receipt of a necessary documentation set confirming the customer’s approval of credit terms results in the release of a loan to the customer.
According to McKinsey & Co. in a June 2018 research (titled Blockchain beyond the hype: What is the strategic value) “the key functions of ‘financial services’ — validating and transferring financial assets and information — very closely coincide with blockchain’s primary revolutionary impact. Blockchain-based solutions, which minimize the number of necessary intermediaries and are geographically agnostic, tackle major existing pain points, notably in cross-border payments and trade finance.
The increased complexities of distribution, various rules governing foreign transactions, and delays in exchanging transaction data across participating agencies are all contributing to the financial services industry inefficiencies and loopholes. Let’s look at some of the most common use cases for blockchain in stock markets, retail banking, asset management, and insurance in the following blogs in https://akachain.io .
akaChain is backed by FPT Software, a globally leading technology, and IT services provider. It is an end-to-end, permissioned, multi-chain network based on the Hyperledger Fabric. Since its establishment in September 2018, akaChain’s product has assisted many enterprises, from SMEs to Fortune 500 firms, to transform with distributed ledger technology. The company provides a broad range of permissioned blockchain-based products and services in multiple sectors, including retail, supply chain, banking and finance, insurance, shopping mall management, etc. to transform with its distributed ledger technology. For more information, please visit https://blog.akachain.io/
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