The centralized bank ledger helps to store money in banks, transfer payments online, and deposit cash. However, these bank ledgers are susceptible to cyber-attacks and online frauds. We have to pay extra fees for online transactions, the process is sometimes slow, or KYC (Know Your Customer) causes delay. There is a panacea for all these problems; it is called Blockchain Technology. Whenever we hear the word “Blockchain,” we instantly remember cryptocurrency like Bitcoin. The demand in the supply chain industry gave birth to Blockchain Technology. The supply chain industry involves hundreds of transactions and complex processes and many parties, for instance, Banking.
What is Blockchain Technology? Cryptographers and miners designed an innovative technology that protects and secures a vast amount of information. Blockchain is a decentralized digital ledger of transactions that stores data in blocks and chains them together. When we add data to a new block, it automatically chains itself with the older leagues. The technology helps in sharing this information with an entire network of computer systems. This makes it secure and impossible to hack or cheat.
What is innovative about Blockchain? This technology is decentralized or distributive. While making the transaction with the other party, one need not take the permission of an authoritative party. If we buy and sell a commodity, the bank verifies and permits us to complete our transaction. However, in blockchain technology, only two parties are involved. Therefore, the process is quick and time-saving. Blockchain involves only two parties in the process of a transaction, encouraging cost reduction.
Blockchain Technology is cryptographically secure and immutable. This technology makes it impossible to change the information stored, and tampering becomes impossible. It is also transparent as the data is stored on the network with everyone. People can check the transaction in real-time. Daily we come across various frauds like identity theft in the banking system. By replacing the traditional banking system and adopting innovative technology, we can build a highly protected financial system and reduce fraud.
With Blockchain Technology, there is no need for KYC or verification. The KYC process takes at least 15–20 days when a new customer joins a bank. It becomes a tiresome and damaging process for a customer. However, suppose we use blockchain technology to update the information of a person on a database and share it with other institutes like banks or diving schools, health insurance companies, etc. In that case, it will reduce time, make the process quick and straightforward. Apart from speeding up the process, this technology can give 24x7 support.
Blockchain promotes intelligent contracts. Smart Contracts are self-executing contracts with the agreed terms and conditions between a seller and buyer; these conditions are written directly in codes. When the contract is met between two parties, it executes the way it is programmed. It dissolves itself automatically. The benefit of a smart contract is that it is transparent, traceable, and irreversible, with no need for any central authority or the legal system. Blockchain Technology revolutionizes the finance industry and fields like law and trade by developing trust between the parties and ensuring the contract’s authenticity.
The Blockchain Industry will not replace the banking system as people have a trust relationship for centuries. However, the Banking and Finance Industry must adopt blockchain technology to make itself more secure, transparent, cost-effective, and fast.