Improving Banking System with Blockchain and Cryptocurrency

The finance industry is keenly looking for ways to explore the use of blockchain and cryptocurrencies in Banking. They are looking for a new innovative technology that can challenge some of the traditional business models (processes/operations) of banking, which may bring progress to a halt. Many prominent banks, like CitiBank, Santander, and UBS, have already begun embracing the fact that disruption caused by cryptocurrency technology can bring a positive change in the banking sector in the coming days.

It's due to the blockchain's ability to store encrypted transactions in an authenticated shared ledger system. Afterward, it enables banks and individuals to send assets all over the world in a credible, secure, and traceable way. Security concerns are always paramount to Fintech, especially global and national banks.

In Blockchain, the block that stores data gets protected using public-private key encryption. This makes a user to access data if he holds the private key. It is what confuses the information stored within cryptocurrencies, therefore, helping in the prevention of data theft.

Now, read on to know how Blockchain and Cryptocurrency in Banking can be used to create an innovative form of banking system.

Blockchain and Cryptocurrency in Banking: No Need for Intermediaries

It's the area where Fintech experts are looking to explore ways which cryptocurrency technology in banking can get rid of intermediaries due to its standard cryptography-based security infrastructure. It brings an automated intermediary system into existence, removing the need for using the existing centralized ledger system that plays the role of a custodian.

In the blockchain, there is no need for a centralized ledger system- it's based on a decentralized trust model, that's not controlled by even a single entity. According to expert market researchers, we can expect blockchain-syndicated loans soon, however, the finance industry will need to align with the standards. They will need to set up checks and balances beforehand so that blockchain technology can make its way into the sector.

Voting:

Another disruption due to cryptocurrency technology the finance sector expecting is in 'voting management'. Using blockchain technology as a proxy voting mechanism can maintain the stability of electronic voting along with increased security measures. In fact, the NASDAQ chief announced that the Estonian NASDAQ market will incorporate the use of blockchain-based technology to enable proxy voting at AGMs.

Shares and Dividends: 

Cryptocurrency developers are modifying cryptocurrency technology to accommodate the issuance of dividends and shares. In 2017, the U.S. Security and Exchange Commission (SEC) allowed the use of blockchain technology to enable Internet Trader Overstack.com to issue company shares.

Blockchain as a Proof Chain:

A group of users verifies the transactions stored in the Blockchain database and not by a single entity, thus, increasing the level of trust and leaving no single point of failure. Additionally, the technology individually timestamps and cryptographically signs each of part of the block in the chain.

So, if any process asks for a proof-of-validity and documentation banks can, instead, use individual blocks, such as for identity verification. Companies can use Blockchain to create certified and verified entities that bring a level of assurance to the fore when executing financial transactions.

Also Read: How Cryptocurrency Enhances the Cross-Border Payments

What Type of Blockchain to Use?

There are various types of blockchain; mainly falling into the category of private and public. Although companies like Ethereum and Ripple could propose to use their blockchain, the blockchain community and banks don't like to depend on a company to transfer their assets.

In Summary:

Indeed, cryptocurrencies' underlying technology, the blockchain, is being taken into consideration by the banking industry. Analysts have found that 94% of financial professionals involved in the survey believed that cryptocurrency in Banking has the potential to bring effective outcomes.