The internet has brought the world of finance to a new level where almost every transaction is now being done online. Modes of multi-purpose payments like checks for quickbooks and mobile wallet are already a breakthrough in financial technology or fintech. They are now beginning to change the way we do business and financial transactions.
On the other hand, there is a much more interesting technology that will revolutionize the world of finance, and that’s the use of blockchain technology. This technology might seem new, but it actually started several years ago.
In fact, bitcoin uses blockchain technology; however, some people think that bitcoin and blockchain are the same. Actually, we can’t compare them because bitcoin is cryptocurrency, or digital currency while blockchain is a technology that is used by many systems, bitcoin being just one among them.
What is blockchain?
Blockchain is a digital ledger that automatically records and manages a list of internet and peer to peer transactions through digital cryptography. Each transaction is permanently embedded in a chain of transactions. This record can’t be changed except through group consensus.
How does blockchain work?
Let’s assume you transact with a bank, such as when applying for a loan. The transaction will only be completed by signing a contract and releasing the fund or payment. Traditionally, this process takes a while as it has to go through various stages of approval, clearing, documentation, authentication, and so on.
With the use of blockchain, every transaction automatically generates a smart contract that is instantly authenticated and recorded. There is no need for any centralized approval as the system is already interconnected with other networks or chains.
When the bank, for instance, approves your loan, the payment can be done instantly without going through a lot of processes as blockchain will automatically register the transaction. The payment record will be protected forever because blockchain also serves as an automated data management system.
What are the advantages of blockchain?
Wall Street companies are now excited about the growing trend of the use of blockchain in the industry of finance. This is because blockchain can greatly reduce the overhead costs of many financial institutions like banks and stock brokerages not to mention the administrative work that it will eliminate and the speed at which every transaction is made.
With blockchain, you don’t need people to work through spreadsheets, or with a software platform just to process and manage all these transactions. Furthermore, you don’t need to keep a copy of every document for safe keeping purposes. Blockchain keeps a permanent record without any duplication; it doesn’t need any human intervention to get it done.
What Is the future of blockchain?
Blockchain is actually the future of fintech. Nowadays, several top universities in the US are beginning to incorporate blockchain not only in their curriculum but also in their course offering. Some of these universities take it seriously by revising their MBA programs with blockchain in mind.
The only challenge faced by these universities is the supply of qualified instructors to teach the subject matter. This is why they’ve started negotiating with blockchain experts who are more or less satisfied with their current job. Some universities even conduct a program that will enable them to discover and select young students who are qualified to become blockchain professors.
The rise of bitcoin has paved the way for the growing popularity of blockchain as an alternative to existing data management and record keeping systems. It’s just a matter of time before all transactions in the world will become paperless, including the use of money and contract signing.