6 Reasons Blockchain Technology Is The Key To Future Of Financial Services

Igor, Business analyst - February 1, 2017
Interview with CEO
blockchain technology

Though now blockchain may even not ring a bell to many people, in a few years it will be the same revolutionary, yet absolutely common thing as the Internet.

The sooner you realize all the benefits it offers, the sooner you will start reaping the harvest when the blockchain era arrives.

Why there is a need for blockchain technology?

1) We depend on third trusted parties, like government and banking institutions, to establish the validity of transactions and other operations.

2) Those third trusted parties are centralized and it means that they can fall victims to malicious attacks.

3) The system leaves out billions of people if their income is not high enough to have a bank account. (the system is based on social inequality)

4) Since transactions are performed via intermediaries, monetary transactions are really slow (they may take several days)

5) They charge rather big commission for their service.

6) We provide those intermediaries with our personal data so our privacy can be threatened (the security of blockchain technology is based on cryptography. It is much more secure)

They are run by unelected, unaccountable bankers and based on a system built on debt, which greatly enriches the global elite while at the same time enslaving the citizens of the world.

What solutions blockchain technology offers:

  • Users don’t depend on intermediaries anymore and reclaim control of all their data and transactions.
  • Distributed nature of the database makes it a good protection against thefts and robbery. The info about transactions can’t be erased. The info is stored in millions of copies across the world. It makes it impossible to be hacked.

If you want to change info about a transaction which took place, you need to hack all those millions of computers at the same time. Sounds pretty impossible, right?

  • Access to banking all around the world. You need just the access to a phone, this way social inequality is handled, and much more people get into the system of transactions.
  • Transactions are instant (like you are sending an e-mail) which is a real businesslike advantage.
  • They are performed without third trusted parties – so they are much cheaper.
  • They are secure because they are based on cryptography (each digital wallet has a secret code which nobody else knows unless you share it (but you don’t typically post your secret code on Twitter, right?) and some digital money units can be sent only using this unique secret code. During the transaction your digital signature is created and this is the warranty that the transaction is valid, and it gets recorded into the ledger.

Blockchain offers benefits beyond financial services.

Blockchain technology has answers to questions raised by IoT.

Blockchain technology opens various opportunities and benefits for many industries, such as healthcare benefits, IoT benefits.

So what is a blockchain?

A blockchain is a database distributed across millions of special computers (nodes). The database contains info about all transactions. As soon as a transaction takes place, the database gets updated. Here is an insightful TED talk by Alex Tapscott, author of Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World.

What is a block?

The first miner (a special problem solving computer) which solves the problem creates a new block – a file where data on transactions are recorded, and a miner gets a reward in the form of newly created bitcoins.

There can be an unlimited quantity of such blocks in the blockchain. The blocks are connected with each other (like a chain). The ledger can only be changed when there is a consensus among the group of the blocks, and that’s why no third trusted party is needed.

What is mining?

Professional bitcoin miners use the special software which anyone can download and very powerful hardware which helps to solve the puzzle fast. Mining is based on cryptography. In simple words, this is solving cryptographic puzzles. Those computers are called miners.

How transactions are performed?

When the transaction is conducted, it is recorded across millions and millions of computers worldwide so it can’t be erased. The ledger is permanent. Every new update is valid and adds to the system.

The security of transactions is based on cryptography. Each person who uses the blockchain and performs transactions has a public alphanumeric address (a string of numbers and letters) to which cryptomoney can be sent, and your secret code which is in your digital wallet, from which digital money units can be sent, and it creates a digital signature when a transaction is performed.

Blockchain is already here:

Sharing economy blockchain-enabled platforms (to replace Uber and Airbnb).

It can be used as well for protecting intellectual property.

Blockchain startups:

Blockchain-based bank 4.0 Humaniq has raised 65 000$ via crowdsourcing.

Summary

The blockchain technology allows us to get rid of intermediaries, manual processing of data, accelerate the process of transactions and at the same time reduce costs. It gives open access to public information. And is a perfect tool for preventing malicious attacks, fraud, and thefts.

The system is simplified since all transactions are recorded in a single public ledger.

Blockchain data is complete, consistent, timely, accurate, and widely available, secure.

Blockchain technology is an invention which will help us to live safer and better in this Brave New World of open innovations.

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