Distributed Ledger Technology & Blockchain in Fintech

Blockchain is one type of Distributed Ledger. Blockchain, a globally distributed ledger technology, is cryptographically secured and consensus checked making it secure, immutable and a ‘tamper-evident log’. Distributed Ledger tech powered Blockchain is believed to be as revolutionary as the internet. The building block of the ‘internet of value’ will enable a peer-to-peer network without the need of any central governing body.

FinTech is a new industry that uses technology to improve activities in finance. Blockchain technology (DLT) could fundamentally change the financial sector, making it more efficient, resilient and reliable.

The main features of the distributed Technology that makes it significant in finance include:

1. Distributed database In Blockchain, the transaction ledger is identical on each node. All participants contribute towards building and maintaining the distributed ledger, based on peer-to-peer technology. This adds the necessary transparency, traceability and permanence to any critical data or asset stored in the network.

2. The Consensus Consensus in blockchain guarantees immutability and adds security to the network. Consensus validates and approves the transactions to be added to the ledger that is the only way to update the ledger.

3. Secure authentication through cryptography Blockchain uses the concept of asymmetric cryptography based on a public and private key. The cryptographic hash and hash pointers add the necessary trail for traceability and provide security of data stored or exchanged in the network.

4. Stamping mechanism The time-stamp mechanism in blockchain makes the network auditable and enables a ‘tamper-evident log’. The merkle proof along with hash pointers allows secure, auditable, traceable network solving the current hurdles in Finance industries.

5. Near real-time Settlement of transactions take place in near real time solving the time latency observed in several finance operations and processes.

6. Smart contracts A smart contract — a computable agreement between two or more parties is signed digitally. Triggers for the execution of a smart contract are events that can be designed and built into the smart contract.

7. Permission-less and permissioned Blockchain Blockchain enables both permissioned and permission-less networks and this is the feature that will enable blockchain technology in mainstream enterprise adoption. In permissioned network, the consensus approval is vested in the pre decided nodes which allows higher transaction speed with improved trust.

Blockchain, in its infancy is evolving at a pace many can not imagine. This new age technology will play a significant role in initiating the fourth industrial revolution.