Blockchain is one of those words that we have been hearing for a decade now. Within this time frame, the attitude to it has changed dramatically. At first, it was introduced as a technology connected with cryptocurrencies, the reputation of which used to be questionable. Now it is used in many different spheres from banking to music. In this article, we will show how blockchain is changing finance.
When in 2008 cryptocurrencies emerged, banks and governments saw them as potential competitors. Blockchain was only known as something that supported Bitcoins. However, once they took a closer look at everything, they saw a huge potential in Blockchain technology and started using it.
The banks take their handsome fees for a lot of work they are supposed to do in order to support the financial system and make it reliable. They deal with authorization, keep all records neat, but what takes another huge amount of time and employees is communication with other banks when it comes to money transfers.
Blockchain offers the safest digital ledger of today which simplifies a lot of procedures. Once any payment is made, it appears in multiple places, thousands of websites simultaneously. When someone wants to make a transfer, the system checks such a possibility in many different places and once it is completed, it is also reflected everywhere. It also works only one way, so it is impossible to change or cancel a transaction. This technology allows us to avoid a tiring process of dealing with confirmations, paper routine, and uncertainty: Once the money is transferred, it is there. Period.
Does it mean that the world will now switch to cryptocurrencies and will stop using banks? Absolutely not! Well, not yet. Many banks have called out for blockchain courses graduates and started working on their own Blockchain technologies to simplify their internal procedures and make operations more efficient.
Let us now see how the system works for us and from the side of banks. If you would like to buy something in a shop and pay with your card, you come to the shop and use your card, which takes seconds.
However, there is a huge system behind it: a request is being sent to your bank to see if you have enough money to make the purchase, after that the amount needed is being written off your account and your bank sends an alert to the bank of the receiver that you would like to transfer a certain amount of money to them. All of this does not happen that easy too: to make this step, the banks have to use intermediaries, such as Mastercard, Visa, or AmEx. After the money is received, the receiving bank needs to send a confirmation to the initial party that the money is there and all is well.
Despite all the complexity, purchases like the ones described above are made in a flash of time. On the other side, sometimes it takes days to process huge amounts of money on a governmental level or when it comes to big international payments.
Let us now see how blockchain technology can help: It removes all confirmation steps and enables us to make instant payments to literally anywhere in the world. No intermediaries are needed, so the payment is processed within seconds.
Moreover, if the process is being significantly simplified, there is no point in paying the banks enormous fees. One of the reasons why people like cryptocurrencies and there is a huge demand on blockchain university courses is that any transfer costs way less than a bank transfer. Banks know it, so having their own blockchain technologies implemented, they will also have to reduce their fees.
To sum up, a lot of changes were already made to the world of Finance. With the appearance of Blockchain, the Finance world has above all things become a safer place. This technology has also cut a notable part of unnecessary confirmations and bureaucracy. More changes are about to come, so we need to keep an eye on what is coming up next.
