What Kind of Changes Can Blockchain Technology Behind Cryptocurrency Bring to the Financial Industry?
Blockchain originated from Bitcoin and is a distributed database technology designed to create Bitcoin. The blockchain has features such as decentralization, highly transparent information, being less susceptible to malicious modification, and data traceability. These aspects are precisely the problems that the financial sector has had problems for years, or that it needs to be cost-effectively solved. Blockchain technology is a major technological innovation in the field of Internet finance. He has created subversive damage to the existing financial infrastructure as well as magical creation.
Trust is the foundation of the financial industry. To maintain trust, the development of the traditional financial industry has spawned a large number of high-cost, low-efficiency, single-point failure intermediaries, including custodians, third-party payment platforms, notaries, banks, and exchanges. Wait. Blockchain technology uses brand-new cryptographic authentication technology and decentralized consensus mechanisms to maintain a complete, distributed, irrevocable account book, allowing participants to adopt a unified approach without mutual recognition and trust relationships. The bookkeeping system ensures the security of funds and information. Block-linked distributed billing, P2P network architecture, negotiated autonomy protocols based on machine algorithms, secure data storage and transmission usage rules, sustainable operating incentives, and open systems to maximize decentralization, Ensuring that this system is “neutral” and “trusted” for any user and thus establishing a trust environment for the economic activities of the parties to the transaction is of great significance to financial institutions.
The embedding of blockchain technology may deepen the significance of Internet finance. One important aspect is that credit can be formed by recording, storing, transmitting, verifying and analyzing information data through procedures. Compared with traditional credit formation methods, blockchain can save a lot of labor costs and intermediary costs, and the recorded credit information is more complete and difficult to falsify.
In addition to the features mentioned above, the main reason blockchain can be called disruptive technology is smart contracts. Smart contracts mean that blockchain trading goes far beyond trading in currencies, and there will be more extensive instructions embedded in the blockchain. Traditional contract means that two or more parties agree or not to do something in exchange for something, and each party must trust each other to fulfill their obligations. Smart contracts have three characteristics: autonomy, self-sufficiency, and decentralization. Smart contracts do not need to trust each other because smart contracts are defined not only by code but also by code, and are completely automatic and cannot be intervened. In Blockchain 2.0, the important features are smart contracts and smart assets. These are the technical foundations of the programmable financial economy and will bring the most disruptive changes to the financial services industry.
At present, there are many financial institutions that have deployed blockchains in various ways. The application of blockchain technology in finance is becoming more and more extensive and in-depth. Here are some financial application scenarios that compare mainstream blockchains.
1. Securities registration and trading
Using the security and reliability of blockchain technology can greatly reduce the operating costs of the exchange and increase the operating speed. Digital stock securities issued through the blockchain record the securities registration, transaction, settlement and information in decentralized books.
Among them, Nasdaq has launched its new platform based on blockchain technology, Linq, which will promote the transfer of shares in its private equity market in a completely new way. Linq’s customers will have an easy-to-understand historical record and be able to transfer their securities, make their records easier to review, and give them more authority in terms of issue governance and ownership transfer.
2. Voting system
Proxy voting is an important and time-consuming operation used by a listed exchange. In the entire stock market, shareholder voting is not only a very frequent and important procedure. If blockchains can be used, blockchain technology can be used to manage the proxy voting system at a very low cost. Shareholders can participate in voting at the conference without having to attend the company’s annual general meeting.
Blockchain-based voting saves costs while also avoiding fraud or other invalid voting. It will focus more on transparency, security, and traceability. In addition to smart contracts, it will promote the related contracts and processes after voting. Automatically.
3. Transaction settlement
Traditional liquidation of financial transactions is long and costly, and the introduction of blockchain technology can speed up the slow and inefficient back-end operation of traditional financial transaction centralization and reshape transaction and settlement processes.
Blockchain’s distributed ledger and smart contract technology features can bring enormous low-cost computing power and real-time clearing capabilities to the financial market. It enables digital assets to move efficiently between counterparties of transactions without any need for any Central agencies are responsible for recording transactions. A shared digital public ledger can be continuously maintained, confirming all transactions on the participating chain, preventing fraud, and bringing about a major opportunity for change in global financial transactions, liquidation, and settlement.
The Australian Stock Exchange is choosing to use blockchain technology as a replacement for its clearing and settlement system. He collaborated with a U.S. company called Digital Asset to build a new trading system for himself because the blockchain can reduce liquidation. The cost and complexity of settlement transactions and save time.
4. Proof of equity and equity crowdfunding
Each participating block node of the blockchain can obtain a complete data record. The owner of the equity can be confirmed by utilizing the characteristics of reliable and collective blockchain maintenance. For the need to store permanent records, blockchain is the ideal solution for land ownership, equity trading and other scenarios.
The blockchain equity registration will make full use of the characteristics of blockchain ledgers such as security, transparency, non-destruction, and easy tracking to record the company’s equity and its change history. The owner of the equity can prove the ownership of the equity by means of the private key, and the equity transfer is transferred to the next family through the blockchain system. The property right is clear and the record is clear. The entire process does not require the participation of third parties.
Equity crowdfunding is based on this system, which can further promote equity circulation and resource sharing. Equity transfer and registration are safer and more convenient. Investors and projects can be shared among crowdfunding platforms. The blockchain smart contract can track the fundraising process, set up to reach the goal of crowdfunding and automatically transfer money from the investor’s account to the entrepreneur’s account. The entrepreneur’s future budget and expenses can be tracked and audited, and transparency can be improved. Protect investor rights and interests.
5. Credit information
The core value of financial management lies in credit. It can be said that there is no finance without credit. Blockchain technology is naturally suitable for the credit system. The features of the blockchain are: data is irreversible, cannot be tampered with, and data is maintained by all participants. If a large amount of credit and transaction data exists in the blockchain, based on this data Analysis and excavation will further reduce our credit cost again.
The traditional modes of credit collection are mainly center records, central query modes, incomplete information, high maintenance costs, and data lag. The inquiry of credit data also has problems such as incompleteness, inaccurate data, low use efficiency, and high cost of use.
In the area of credit reporting, blockchains have the advantage of relying on algorithmic algorithms to automatically record massive amounts of information, store them on every computer in the blockchain network, and store them on each node. The information is transparent and prevents tampering. And maintenance costs are low.
6. Digital bills
Digital bills are a brand-new form of bill display that combines blockchain technology with bill attributes, regulations, and markets, and are completely different from the existing electronic bill system’s technical architecture. Digital bills not only possess all the functions and advantages of electronic bills, but also incorporate the advantages of blockchain technology, becoming a safer, smarter, more convenient and more promising bill form.
The bill transaction using blockchain technology can completely solve many problems of violation of laws and regulations. From the application, the issuance, the transaction, and the acceptance of a bill, the key information of this entire process will be recorded on the blockchain and cannot be tampered with. Once the digital instrument has been traded, there will be no chequered account, but it will also facilitate the auditing and inquiries of the supervisory department and achieve full coverage and hard control of the supervisory policy. On the other hand, the digital currency transfer path in digital bills is clear and cannot be handled by third parties.
7. Foreign exchange transfers and settlements
High fees and long transfer periods have been pain points for cross-border payments and settlements. Cross-border remittances and settlements based on blockchain or distributed network technologies can enable users to complete cross-border transfers and settlements at a lower cost and faster speeds through a decentralized mechanism.
The global transfer and settlement system based on blockchain solves the trust problem of transferring remittances between non-acquaintances through the introduction of a gateway system. The relationship between users and gateways is reflected in the entire system as a kind of creditor-debt relationship. Debt relations are stored on several servers through a distributed network. The servers communicate with each other in a P2P manner to avoid the risks caused by single and centralized servers. The system ensures data security through certain encryption technologies. On the other hand, based on the consensus, multiple selectable clearing and encrypting digital currencies are set to function as a similar margin and transaction fee in each transaction process, thereby increasing the attack cost of malicious attackers to ensure operational safety.
The current payment model, whether it is the payment of the banking system or the payment of the third-party payment company, is the central maintenance mode. The transaction records, account balances, and account security management are all built around the central payment system. The current payment storage system is composed of many organizations and large infrastructure systems. In the present day of the Internet, this system is actually sacrificed. Technical efficiency, the use of cost is very high. Such payment systems have many problems such as security risks and single points of failure, too much investment in infrastructure, high maintenance costs, monopoly and collective fraud.
Blockchain technology changes mobile payment in several ways:
More secure: Transactions backed by blockchain technology are based on a tamper-proof ledger and it can be very difficult to break into user accounts.
Instant payment: With the use of blockchain distribution technology, payments can really reach instant.
P2P lending: By using blockchain technology, borrowers can obtain loans directly without the intervention of traditional banks or financial institutions.
Cross-border payment: Blockchain can allow mobile users to transfer money to anyone in the world without paying high service and transaction fees.
Traceable payment: All transactions are recorded in a public ledger. All merchants can monitor payment transactions and can be derived from more joint marketing methods.
Internet of Things Payments: The Internet of Things and Blockchain technology collections simplify the connection between all your devices, allowing you to use smart IoT devices to consume and pay anytime, anywhere, without fear of fraud.
9. Digital currency
Since the birth of Bitcoin in 2009, there has been a great wave in the world. Of course, it has caused a lot of controversy and resistance to Bitcoin. However, since the last year or two, the state and financial institutions have started to pay attention to the block technology behind Bitcoin. What role can he play in the current financial system? Can it improve efficiency and reduce costs? Central banks in various countries are exploring the field of e-money (now referred to as blockchain finance or internet finance). They are no longer exploring the prohibition of entering the market, but rather want to develop a digital currency that completely replaces cash.
The central banks are currently actively developing and developing digital currencies. In the future, digital currencies will not only have clear prospects but have even risen to the national strategic level. The issuance of digital currencies will not only reshape the behavior of depositors, but will also reshape the operating model of the entire economy. Digital currency based on technology such as blockchain will effectively reduce the high cost of traditional banknote issuance and circulation, enhance the convenience and transparency of economic transaction activities, and help build a new financial infrastructure, further improve the payment system, and improve Paying clearing efficiency, promoting economic upgrading and efficiency upgrading.
In addition to these, blockchain is making more extensive explorations in a wider range of financial fields such as public pension registration, bonds, joint loans, reciprocal credit, repurchase transactions, collateral management, futures and options, etc. .
Blockchain technology is providing entirely new ideas for financial development towards full digitalization, decentralization, and intelligence. He will redefine modern finance and create more new business and economic models.