What is Blockchain?

A blockchain is a continuously growing list of records, usually ledgers, which are linked and secured by cryptography. Each block mostly contains a cryptographic collection of the previous block, a timestamp, and transaction data. A blockchain is resistant to modification of its data from outside sources, even hackers.

Normally, a blockchain is a digitized and decentralized ledger of financial transactions since the records are considered super-safe. Thus, a blockchain is usually used for cryptocurrency transactions. It allows market participants to keep track of any currency transactions, including digitalized forms, without using any form or central recordkeeping stored in a commercial ISP provider’s server.

Blockchain was actually and originally developed as an accounting method for the Bitcoin virtual currency. The technology is basically used to verify financial transactions in virtual form, but any document can be coded, digitized, and inserted into any blockchain. Authenticity of any transaction or document can be verified by an entire community using blockchain rather than depending on a single centralized authority.

Advantages of blockchain and how it may affect businesses in the future

Using blockchain and its Distributed Ledger Technology (DLT) increases record keeping efficiency and can add up to some serious cost savings. Blockchain technology makes it possible for businesses and banks to streamline internal operations, dramatically reducing expense, mistakes, and delays caused by traditional accounting methods for record reconciliation.

  • The widespread adoption of blockchain can bring enormous cost savings in three areas: Electronic ledgers are much cheaper to maintain than traditional accounting systems and employee headcount for accounting in businesses or companies can be greatly reduced.
  • Automated blockchain technology result in far fewer errors and the elimination of repetitive confirmation steps.
  • Minimizing the processing delay also means less capital being held against the risks of pending transactions.

To add to the advantages, some smaller number of millions will be saved by shrinking the amount of capital those companies or businesses are required to put up to back unsettled or outstanding trades. Greater transparency and ease of auditing will definitely lead to savings in anti-money laundering regulatory compliance costs as well.

Using blockchain also means removal of almost all human involvement in processing that becomes particularly beneficial in cross-border and international trading that usually takes much longer because of time-zone issues and the fact that all parties must confirm payment processing. Blockchain technology can set up smart contracts or payments triggered when certain conditions are met.

Today, many financial institutions around the world are bankrolling research into methods to harness the speed, accuracy, and efficiency of the blockchain. In 2016 alone, six financial companies successfully trialed their specific and distinct blockchain technologies in parallel, using multiple cloud technology providers. They are even trying to test their financial-grade distributed blockchain ledger platform for commercial use.

In that same year, four major banks came together to develop their own utility settlement coin (USC), a new digital currency that can be recorded using blockchain. Led by UBS Group AG, they include Bank of New York Mellon Corporation, Deutsche Bank AG, and Banco Santander S.A. In 2017, six more banks joined them, namely, Barclays Bank, Credit Suisse Group AG, Canadian Imperial Bank of Commerce, HSBC Holdings PLC, and State Street Corporation.

This entry was posted by Staff Writer on Friday, May 18, 2018 at 6:26:05 AM and is filed under Mixellaneous.

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