Today we will talk about what is blockchain and how will it change banking services…
Blockchain, as a technology, is gaining ground worldwide, both in terms of popularity and practical application. Of course, the word “blockchain” is most often used in the context of Bitcoin and other cryptocurrencies. This is because digital currencies were the first to use this technology. It simply is a database. However, it differs from other solutions of this type by two important features: decentralization and immutability.
What is blockchain?
What does this mean in practice? Blockchain does not store data in one location. That is, blockchains are copied and distributed across a network of computers and each copy is updated when a new block is added to the chain. With decentralization, the data stored in Blockchain is difficult to manipulate. And, immutability provides certainty that the information contained in the network cannot be changed.
The financial field is an important field of application for blockchain technology. The blockchain is essentially a decentralized distributed ledger. A ledger is equivalent to a way in which all people can participate in accounting. In the current era of technology-driven financial development, blockchain has become the latest driving force in finance. So much so that blockchain provides the supporting technology to solve trust issues in the economic and financial fields.
It has high reliability, simplified processes, traceable transactions, cost savings, reduced errors, and improved data quality. It is a technology that can once again reshape the basic framework of the global financial industry, especially the credit transfer exchange mechanism. It can also accelerate the speed of financial innovation, greatly improving the efficiency of financial operations. Operations such as digital currencies, securities trading, credit payment and settlement, and customer identification will be much faster and more secure in the future.
Will blockchain change banking services forever?
Blockchain technology provides a cryptographically secure way to transfer digital assets without having to rely on trusted third parties, such as banks. In addition, tools such as smart contracts promise to automate many tedious banking processes. From compliance testing and claims processing to distributing the contents of a will. This technology adopts a decentralized distributed structure, which saves a lot of intermediation costs and can ensure better data security.
Blockchain application platforms for the financial industry are intended to bring transparent, secure, and verifiable business models to IT. Especially in the financial sector. With decentralized technology, including a growing ecosystem, many tasks can be performed better: faster completion of business operations, more secure transaction processing, cost reduction, and closer guidance to regulatory requirements. Also, it has a timestamp that cannot be tampered with, which solves problems such as data tracking and transaction forgery.
What are blockchains like?
A blockchain is a distributed transaction database. What is special is its structure: it grows as one digital block joins the other. So, each block has exactly one chronological predecessor and one chronological successor. There are no more connections between the blocks, but the connections to the previous and following blocks cannot be broken. This digital link creates a list that documents the values of its users. As well as all data records stored at all times: a global trade repository.
This turns the blockchain into a huge digital dataset that is updated in an orderly fashion and archives transfer activities within a cryptographically sealed network of participants. Unlike conventional databases, it is not located on a single server but is identical in large quantities: all network participants (so-called “nodes”) have a complete copy in their local memory.
What is mining?
Mining is a basic way of participating in blockchain development, and it is also the basic guarantee for maintaining the stable operation of the network. Mining refers to a distributed consistency system that is used to confirm and verify all pending transaction records and write them to the public blockchain. Just like in real life, these people involved in mining are called “miners”.
This process is very similar to gold mining. The miners transmit the block that meets the mining difficulty conditions throughout the network. After verifying that the block meets the mining difficulty conditions and that the transaction data in the block meets the protocol specifications, each miner will link the created block. For this, the miners use special software that solves mathematical problems and obtains the blocks.
What kind of blockchain platforms exists?
For the development of products and services using blockchain, a platform is indispensable as the basis for implementing blockchain development. Today, there are many different types of platforms available, from vendor-specific to open source. For example, Ethereum, an open-source decentralized computing platform/operating system. Quorum, an enterprise version of Ethereum. Ripple, an enterprise platform for global payments. Hyperledger Fabric with a focus on B2B and R3 Corda for financial services.
There are several ways to classify blockchain platforms. One of them is depending on the intended use. For example, it is preferable to use Bitcoin for simple remittances, Ethereum for gaming, and Ripple or Corda for interbank remittances as a development base. Other classification methods include, for example, the type of permission, presence or absence of virtual currency, presence or absence of smart contract function, or high confidentiality. The important thing is to choose the platform that suits the need of each company.
Is it the future of the global economy?
Over the last decade, there has been an intense debate in the world about the use of blockchain technology in the economy and its revolutionary importance in terms of ensuring security, protecting user data, and the speed of online transactions. Recently, this debate has gained momentum as companies and private and public sector institutions have moved forward in exploring the applications of blockchain technology in other areas of the economy and society.
Therefore, blockchain technology can be expected to contribute in the near future to changing business models in many sectors, such as healthcare, finance, energy or utilities. Among other things, this technology may become one of the important technological catalysts of the fourth industrial revolution, which will lead to the so-called 4.0 economy, in which the production process is carried out by “smart factories” within “smart supply chains” that are cyber-physical systems connected by the Internet.