Transition from Modern Banking to Blockchain
The world is experiencing a transition to a digital world as it is equipped with latest technology. Here in this paper, there will be discussed the similar transition that is toward the digital methods of transaction that is proving to be more efficient source. Blockchain is emerging technology that can be said as a digital record of transaction. The name of Blockchain is the combination of two words i.e. Block; individual records and Chain; linked together in a chain. These are the records of the individuals are linked to form a single list. Similarly blockchains can be denoted as these are used recording the transaction that are made using digital system with cryptocurrencies like Bitcoin and it also have some other applications. Blockchain is spreading its process thru a network of computers throughout the world, and it permits Bitcoin and other cryptocurrencies to manage and work without any necessity for a dominant consultant. It brings a lot of benefits and removes many fears and risks and compensates in the form of No fees of processes and transactions. Through this decentralized ledger that is used for payments (like Bitcoin), Blockchain technology provides faster services related to payment in lower fees as compared to banks. It helps to reduce the operational cost by distributed ledgers and eradicates the distances from the real-time transactions between financial institutions. Blockchain decreases the role of the middleman in the privileges handovers; it decreases asset interchange charges, that connect to the large markets of the world, and it decreases the uncertainty of the old-styled securities market. About $17B to $24B per year could be saved by moving securities on blockchain in global trade processing costs.
Blockchain, after development of internet is a 2nd most important thing. These technologies have major influence in financial sector and banking. Blockchain is capable of bringing instability in any business because it has faster transactions, better transparency and brings numerous benefits. Cryptocurrency is a sort of new digital asset that classes that has no central authority. Any financial sector that has poor system and clarity and little approach is weak and that will be disrupted by blockchain application. This is the reason that distributed ledger technology (DLT) brings great benefits and also brings some threats. Amazon, Google, Facebook and Uber are some disruptors who built some software have strong business that is because of internet and the coming generations start-up will urge them to make new services and business with blockchain. It is expected that blockchain will become basis for new facilities and application that work differently from those working on the traditional and controlled databases. Cryptocurrencies can be called as an early examples but many other will also follow this.
Financial services sector is actually full of the middleman like banks that create trust worthy relations among the parties who making transactions like borrowers or lenders. Blockchain is an apparatus which will decrease the role middle man and will create trust without any centralized control. The clout of eradicating the middle man is the capability to decrease the transaction fees and take back the mechanism from influenced financial mediators. While concerning cryptocurrencies, it clear that today the most of the worth is linked with hypothetical business rather than actual use cases. But having a currency that is not offered by any central authority, these are some kind of protections particularly in countries with concerned central banks. It can be referred to the currency of Venezuela that briskly trailing its value. And the people who kept their money in crypto they saved their savings because there was greater shield against such fast currency deflations.
Influenced from blockchain, most of the commercial banks have developed and applied the blockchain technology to bring betterment in the present centralized banking system. Most of the financial organizations have removed the role of middlemen by using the securities of blockchain, immutability, clearness of blockchain. But it is also denoted that as blockchain brings not also benefits but it also have some threats to the banking industry. Contrary to the Blockchain, banks play their role as middlemen and get the benefits of the trust while blockchain is a technology that removes its role as a central authority.
All in all, in the light of above discussion and previous approaches, it can be said that financial sector is the major that is being greatly influenced by the blockchain. Most of the financial institutes including banks have established and functionalized the blockchain technology to transport improvement in the current compacted banking structure. Banks and financial sectors should employ blockchain technology to get maximum benefits and facilitate their consumers. Commercial banks have to capitalize a lot of capital in a central database, though the dues and repairs of terminal will be too high. Blockchain is proficient of resolving the glitches because the practice of an efficient ledger and blockchain mechanism is accomplished of constructing a model with fewer fees. Consumers always seek their benefits so, traditional system must be transformed with the equipment of technology and reduce the fees and facilitate by reducing the complexities and difficulties by increasing transparency.