By Enerd Pani,
Technology & Innovation Writer
Blockchain technology, a current software that allows for unchangeable database entries, is being utilized by Banks at an increasingly rapid rate. Also known as a DLT (Digital Ledger Technology), Blockchain operates by centralizing record keeping in primarily financial transactions without needing the consent of a third party. The technology is incredibly innovative in the sense that multiple users may have access to the data and provide confirmation for their respective organizations.
A very diverse amount of investment banks, commercial banks, consulting firms and other fiduciaries have seen Blockchain as a very productive tool in decreasing cost of expensive banking processes that can be made more efficient by having less entities involved. Blockchain was first put in the spotlight in 2009 where it was the software utilized to power bitcoin and has since been utilized by smaller Fintech companies and startups.
To compete, with said startups, banks have been adopting Blockchain as a method for making themselves more competitive in the long term. Additional benefits of Blockchain include but are not limited to a more narrowed focus on project management that can lead to a more efficient and quicker completion to various tasks and ongoing information technology tools. Blockchain also allows for easier compliance with various fiduciary laws by providing transparency within transactions and being able to search financial information at an easier pace through various filters. Also, Blockchain is very secure in the sense that the decentralized nature would make it very hard for hackers to corrupt. One can almost consider it similar to a “Google Doc” that multiple entities could have access to without the need of an intermediary.
Blockchain’s internet structure is comprised of various nodes in which numerous clients can have access to by receiving a copy of the Blockchain to validate and relay transactions. The interaction for various deals and assignments have shown to become more user friendly and both time/cost efficient with Blockchain implementation. What makes the process much easier to utilize is that every node is its own “administrator” and can join various other nodes voluntarily. The decentralized nature of the tech can lead to many benefits in everyday life.
Blockchain would eliminate various intermediaries that allows entities to be continuously connected with other clients or contractors and partake in business deals on their own terms. It will also lead to various business applications for digital information. Some applications would be complete transparency when it comes to governance, supply chain auditing that can authenticate where certain products have been procured and can validate certain units. The world of finance would be transformed in terms of trading would be much more easier as trade confirmations could be instantaneous and would remove further intermediaries such as clearing houses.
One issue considered with the implementation of Blockchain is that there may be problems with synchronization and storage capacity as the every growing block chain becomes bigger and entries with the Blockchain entries being completely immutable.
One could figuratively see the entire financial transaction history of a company through a block chain, allowing for easier record keeping. Within Bitcoin, on average, a single “block” is added on the Blockchain every 10 minutes where it is authenticated by users without central authority. It would seem the technology is meant to disrupt the status quo and various industries by cutting out various middlemen.
All together Blockchain appears to be an amazing tool for both individuals and companies to utilize. Users can get increased security and transfer information more easily while corporate entities can cut cost by using cheaper electronic ledgers as opposed to traditional accounting systems. Currently, four major banks, UBS Group AG (NYSE: UBS), Bank of New York Mellon Corporation (NYSE: BK), Deutsche Bank AG (NYSE: DB) and Banco Santander S.A. (NYSE: SAN) are working together to make a Utility Settlement Coin which can be used to buy securities and is powered by Blockchain while scheduled for a 2018 introduction. It is to be seen if various other industries will follow suit with the implementation of Blockchain which may extend beyond cryptocurrency.
A version of this article appeared in the Tuesday, September 26th print edition.
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