siliconindia | | March 201919The Blockchain is promising. Transferring to a Blockchain system would definitely speed up services like worldwide payments, equity clearing, trade finance, and loansthe Blockchain. The blocks in turn are stored chronologically. Blockchain as a technology was designed for sharing transaction infor-mation across interested parties. The technology holds the potential for all participants in a business network to share a system of transaction records. It is expected to be used in a variety of industries and for a variety of reasons. One such domain vertical is the bank-ing and finance vertical. Some of the interesting and novel applications are discussed in brief here. From a banking and financial do-main point of view, Blockchain reduc-es the cost of establishing trust among participating entities. Trust is an es-sential element in all financial trans-actions. The current digital economy is built around a trusted authority as a third party. The role of a trusted third party is played by banks. All online transactions rely on trusting someone to tell us the truth. Blockchain has the capability to redefine the digital realm with dispersed consensus mechanism, where all online transactions from various time slots, concerning digital assets can be corroborated at any time in the future. The distributed ledgers in a public/private domain are driven by smart contracts eliminating third party interventions and bringing the cost of trust and transparency. Conventionally, banking and fi-nancial transactions were recorded in ledgers which later moved to central-ized electronic ledgers. Reconciliation was time consuming, and an exam-ple for this is Intra-bank cross-border payments. Different parties work with copies of the electronic ledger and transact through messages. The essen-tial strength of Blockchain is the elim-ination of duplicate data with an im-proved settlement. Blockchain saves on reconciliation cost between banks and prevents losses due to documen-tary frauds. It can be used to facilitate payments and settlements in a range of different circumstances, offering near real-time transfer of funds and settle-ment time reduction.Banks are conscious of data qual-ity. On a conventional platform, transactional data resides in duplicate locations. Interested parties with ma-licious motive move in for altering the stored data. This can be avoided with Blockchain. A mutual contract struck between any set of transacting entities in the blockchain network is generally termed as a transaction. Blockchain helps in managing the transactional data quality. With Block-chain, the transactions get validated and distributed based on smart con-tracts. They are fragments of software that spread blockchains' value from a record of financial operations entries to automatically applying terms of multi-party agreements. Each transac-tion or contract between two or more members in the network requires verification or validation by the net-work. Validated generic Blockchain transactions are called smart con-tracts, which are embedded in Block-chain networks. These are common-ly agreed on terms between parties which automatically execute once conditions are met.Smart contracts built on electronic ledgers open up a new dimension of fi-nancial supply chain transactions. This is another interesting domain of the application area. The smart contracts can be useful for tracking the letters of credit, or bills of lading, along the fi-nancial supply chain downstream and up-stream. Bitcoin technology helps in increased reporting of financial sup-ply chain transactional data. The conventional banking pro-cesses are usually linear, similar to the assembly line of the manufacturing in-dustry; for example, the maker-check-er/cross check/approval processes. The purpose of the maker-checker process is to help the banks and finan-cial Institutions to emphasize control leading to decisions. This hierarchi-cal decision process leads to delays in decision-making, leading to longer processing time. Blockchain simpli-fies the decision making process with distributed ledgers.The Blockchain is promising. Transferring to a Blockchain system would definitely speed up services like worldwide payments, equity clearing, trade finance, and loans. Dr. B Muthukumaran
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