As a large number of financial institutions and banks continue exploring blockchain and its applications, it is becoming evident that blockchain is turning out to be a positive disruptor with the potential to redefine the financial sector.
So, what is blockchain?
Simply put, a blockchain serves as an open, distributed, ledger that can record digital transactions between two parties efficiently and in a verifiable and permanent way.
The key requirements for blockchain for business are –
- Shared Ledger: System of record of all transactions across business network. The ledger is shared between the participants and each participant has their own copy through replication. The ledger is permissioned, so the participants can only see the transactions appropriate for them.
- Smart Contract: The business rules implied in a contract are embedded in the blockchain and executed with the transaction.
- Privacy: The ledger is shared but the participants require privacy
Trust: The participants that form the business network decide who will endorse transactions. Endorsed transactions are added to the ledger. Once added, the transactions cannot be modified or deleted. Verifiable audit trail is maintained. Trust is achieved through consensus, provenance, immutability and finality.
Blockchain has blocks?
Yes, blocks are containers for transactions and transaction related information. Each block is granted a unique hash as an identifier as well as a reference to the previous block.
Blocks can also exist as a super unit for multiple transactions. Depending on the scenario, blocks have different meta-information and size. To verify the integrity of transactions, blocks contain a transaction checksum. As information from the transaction header is hashed and confirmed as unaltered in each block, integrity is established and maintained through the blockchain.
Future in the finance industry?
Looking at the surveys and the trends, the finance industry is embracing blockchain technology for the demonstrated cost savings, transparency and safety, and transaction speed. According to a survey conducted by The IBM Institute for Business Value with the support of the Economist Intelligence Unit, 91% of 200 banks across 16 countries are investing in blockchain solutions for “deposit taking” by 2018 to protect against start-up non-banks. A full 15% of banks surveyed – Trailblazers – expect to have a commercial blockchain solution this year. And 7 in 10 trailblazers see blockchains as a means to creating new business models and accessing new markets.
All in all, it looks like blockchain is here to stay and just starting its FinTech disruption!