Blockchain in Banking
The most popular niche for blockchain applications except cryptocurrencies is the financial sector.
Each bank company should constantly check and reconcile data independently to maintain the relevance of data in its database. When a two-way exchange is required, these processes are too slow and ineffective. Blockchain can greatly simplify the data reconciliation process by making it part of the transaction processing routine.
The efficiency of the banking system is also enhanced by lowering costs. Banks can generate additional sources of income thanks to the emergence of new business models and blockchain-based products.
Benefits of Blockchain in the Banking Sector
Carrying out faster and cheaper transfers
This is especially beneficial for cross-border transfers and micropayments, where bank fees can be comparable to the amount transferred.
In banks such transactions take a long time (up to 3–5 working days) and are expensive (from 1% of the amount).
Impossibility to fake data
Almost everyday you can hear about some hacker stealing money from some bank accounts. This happens mostly because the information is easy to access. Blockchain in banking makes accessing data and stealing information impossible. The thing is that the code of the new block is different from the sequence of the others, it is not possible to rewrite the entire chain.
The ability to automate processes and quickly process transactions
This allows you to reduce costs and staff. Blockchain makes it possible to get rid of complex document flow, because any operation can be traced. The technology itself guarantees the invariability of data, and the human factor is excluded.
Ensuring the immutability of transactions
Impossibile of make changes retroactively and forging reporting. The banking system is not transparent. The blockchain will make all operations more transparent and increase the level of trust between all participants.
Cons of Blockchain in Banking
The essence of the blockchain is in decentralization, while the essence of the banking system is in complete centralization and total control.
If the blockchain lives up to expectations, banks will be able to provide services faster, cheaper and easier, which will lead to a drop in their revenues. In addition, millions of jobs could be at risk.
Despite the serious shortcomings of the existing banking system, it has its advantages:
- a developed regulatory framework,
- deposit insurance,
- the ability to cancel an erroneous transaction,
- the ability to receive a refund in case of a hacker attack.
Blockchain networks do not have all this yet. Instead, they have issues that need to be solved: problems with scalability, bandwidth, and security.
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