The advancement of technology has led to many revolutionizing innovations in the field of fintech. Technologies such as payments applications, cloud computing, blockchain, etc., are changing the ways of the financial industry. Today, blockchain has become very popular due to the popularity of cryptocurrencies. Hence, causing a series of changes in the fintech industry.
If you are not up-to-date with recent trends, let us help you understand what blockchain is? Blockchain is a system used to record transactions of cryptocurrencies, and equivalents of these transactions are then distributed to different computer systems via the internet. It is a digital ledger in which transactions are stored so that it is impossible to change, hack, or cheat the system.
In this article, we are here to discuss the four ways blockchain is transforming fintech. Let’s get started.
4 Ways Blockchain is Changing Fintech:
The notable changes that blockchain is bringing to the fintech industry are as follows:
Creating Digital Ledger:
According to Carlos Barbero Steinbock, a lecturer specialist in cryptocurrencies, blockchain, and the fintech industry at EU Business School, a blockchain is similar to an accountant’s general ledger. EU Business School offers majors in blockchain in their MBA program.
In simple words, a ledger is a book in which all the transactions are recorded with proper time stamp and annotation, while in a blockchain, a block records the transaction in the same way. The whole life cycle of money as it flows from one hand to another can be tracked digitally through blockchain, as every transaction is time stamped and recorded chronologically.
Protection Against Fraud:
No one has complete control of a blockchain because it is decentralized. It means that it is impossible to alter a blockchain in any way. Each transaction or block is recorded through a node by using distributed ledger technology. Here, a node can be any smartphone, computer, large server, or any other device.
Another lecturer at EU Business School Benjamin Xie says that blockchain offers huge protection against fraud as it is immutable, meaning the transactions recorded on a blockchain are hard to change. Bitcoin, the world’s first cryptocurrency and blockchain established in 2008, has never been hacked because it is a decentralized structure.
Democratize Money Management:
In the fintech industry, blockchains are used for maintaining and recording cryptocurrencies, making it possible for you to hold your money at a place other than a bank. People who have cryptocurrencies such as Bitcoin, Ethereum, DogeCoin, etc., use digital wallets.
These wallets have a private key, which is important for sending and spending their cryptocurrencies. Moreover, the wallet has a public address that allows a person to receive payments from others. People who possess these unique keys are the sole owner of that coin. Furthermore, the money is entirely free, there is no such entity as a bank that can control it.
Removes Third-Party From Transactions:
As we’ve previously mentioned, it is hard to temper the information recorded on a blockchain, making it more reliable. Moreover, blockchain offers multiple advantages in the field of security. The most important one is that it removes third-party access from transactions, which is required for other transactions. It helps in preventing fraud and securing people’s money.
In your daily life, whenever you do a financial transaction an authority such as Visa or American Express is there to validate the transaction. Moreover, this can be expensive because sometimes the validation of transactions involves more than ten parties, and these employees are not working for free. The involvement of this many people can cause errors in the transaction recording. However, these kinds of errors are impossible in the case of blockchain as it follows a decentralized network.
With the current popularity of cryptocurrencies, blockchain is going to expand further in the future. Online transactions are changing the traditional banking systems, making them more flexible and reliable. It has played a vital role in the popularity of blockchains.
Blockchain impacts the financial industry in numerous ways by constantly challenging the good old ideas of the banking system. It helps in making finances more secure and the responsibility of the individual. It will help in bringing the greatest challenges in the finance sector. We hope that this article was helpful for you, and for more information on fintech, you can read our other articles on the fintech tab. See ya!!!