Blockchain revolution in the banking industry could allow for cheaper share trading and quicker settlement providing confidence to various participants in times of stress, as blockchain allows participants in a network to agree that each transaction has taken place and to keep a data of all transactions instead of leaving the record-keeping at one central place and how it’s done? Because The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.
At the heart of a blockchain network is a distributed ledger that records all the transactions that take place on the network. A blockchain ledger is often described as decentralized because it is replicated across many network participants, each of whom collaborates in its maintenance.
In addition to being decentralized and collaborative, the information recorded to a blockchain is append-only; using cryptographic techniques that guarantee that once a transaction has been added to the ledger, it cannot be modified.
The industry is also working on increasing the volume of transactions per second that the technology can handle, which is not yet high enough for public equity markets.
In simple words, a blockchain is a historical record of transactions, much like a database.
We can say that blockchain is revolutionizing the speed and efficiency of transactions. While the application of the technology is still in the proof of concept stage, it could play a positive role in a diverse range of industries and sectors including banking, commerce, healthcare, insurance, and government.
Gautam Jain, the Global Head of Digitization and Client Access at Standard Chartered Bank, said:
“This is revolutionary technology. What we do with the revolution, the industry is still coming to terms with. Hopefully, organisations will be able to harness the power of this technology for the advancement of the society and community, especially banks to make global trade and financial services much stronger to help connect communities and help our societies grow.”
For better understanding, let’s discuss how blockchain works in banking:
- A wants to send money to B
- The transaction is represented online as a “block”, a coin or a token in a database
- The block is broadcast to every party in the network
- Those in the network approve the transaction
- After validation, the block is added to the chain, which provides an indelible and transparent record of transactions
- The money moves from A to B.
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