Blockchain technology is considered one of the most revolutionary technologies in the new era, and many people think it will become future technology. However, the idea of shared ledger has been existed for a while. The central bank shared the classification account with financial institutions including banks, but the banking system is characterized by the central bank's control of commercial banks to a certain extent. Therefore, they operate in centralized systems. Private blockchain has no central authority, so the system is decentralized. In this article, the differences between blockchain and traditional banks will be explored, and blockchain technology will bring to the traditional banking industry.
About blockchain
Blockchain is a distributed database, which means that equipment used for database storage is not all connected to a public processor. In essence, it maintains an increasing order or list list, and each block has a time stamp and linked to the previous block. For security purposes, this means that users can only edit the blockchain part they have, and the entire distributed blockchain remains synchronized. The distributed timestamp server means that security is intimidated in the blockchain system, but allows autonomous and decentralized database management.
The value of the blockchain is that although it allows information sharing, it also provides high levels of security, which is relatively easy to save at extremely low cost. Because it can record transactions, determine identity and verification contracts, users can cancel third -party agencies that usually ensure safely and effectively handling transactions. The benefits of this financial aspect are obvious, but this secure digital contract also provides important applications for smart grids, medical information sharing, and intellectual property supervision.
Blockchain process
Although blockchain applications have made progress over the past few years, for most people, this is an unknown area. However, companies that are eager to get rid of excess costs (that is, middlemen) are quickly recognizing the value of this technology and find new methods to use the technology to manage transactions. Individuals should realize that many companies they hire are actually third parties, adding their own costs to the overall transaction fee. Imagine that if we make full use of the advantages of blockchain technology, exclude Uber beyond the sharing of the car, exclude publishers outside our e -book sales, and exclude music studios outside the purchase of songs? Of course, this situation has its disadvantages, but this is another important way to give consumers' power.
At present, blockchain supervision is very lacking, and the utilization rate is low due to concerns about its safety. However, some countries have been supervised by Bitcoin, and many countries are studying the use of blockchain; in the end, if we really want to enjoy all its benefits, we will need a global standardized regulatory framework to manage this technology.
Blockchain and traditional banks: Which is better?
From the perspective of blockchain and traditional banks, there are several things that need to happen. First of all, banks must design efficient transaction processes, and people must quickly verify transactions in any possible way.
Data integrity is essential in these two cases, but it is critical to blockchain technology. This is why many banks may continue to use blockchain technology in the short term. Similarly, the liquidation and settlement system must be active and secure without stopping transactions or destroying the financial system.
There are many concerns about whether people can meet these requirements. In addition, people are worried about how the company completely redesigned some existing blockchain applications to meet the financial industry standards.
Nevertheless, it is obvious that sooner or later, blockchain technology has the huge potential of subverting traditional finance. Once it disrupts, everything will become more efficient. Unfortunately, the status quo between banks and blockchain technology makes it difficult for these two departments to cooperate with meaning. For security considerations, and how banks will become more stringent market performance in the United States, China or Europe, banks have always been skeptical of this technology. This is another key factor that traditional banks are unwilling to cooperate with blockchain technology.
Can the blockchain subvert traditional banks?
Blockchain technology can help banks in many ways; the following are some of them:
Transaction processing -Blockchain classification accounts can easily store and process data to promote market transactions. In addition, it will simplify all complex processes during this period and benefit banks and customers.
Asset services -one of the other important things that banks have to do are asset services. It refers to managing all information about the assets held by banks. These assets can include intangible assets such as financial products, physical products or intellectual property rights, and blockchain has a large number of applications in this regard. These are the two key areas where blockchain can subvert traditional banks.
Blockchain technology will bring the benefits to the banking system
1. By improving security and reducing fraud
Blockchain can also help eliminate fraud because it can create clear audit clues. It also has multiple redundant, so once the information is uploaded to the network, it is almost impossible to change any information.
The blockchain network is maintained by thousands of computers, which means that there are no central points to hack the network and change data without leaving evidence. This aspect of the blockchain makes it very important in the current global cyber crime and ransomware attacks. These attacks may endanger sensitive information and cause victims to lose hundreds of thousands of dollars.
2. By reducing the cost of banks and customers
The capacity of the blockchain has a significant reduction in bank service costs and improves product quality.
Today, financial institutions are looking for methods to implement this technology to solve the problem of speed and cost. When using the blockchain, some tasks can be automated. Blockchain is a distributed database that is safe, transparent, and easy to implement. These characteristics make some processes related to bank activities possible (for example, paying or issuing loans).
3. By reducing human errors
Various reports show that the errors in the preservation and recording of accounting, record preservation and reconciliation are one of the main reasons for fraud. In terms of security operations, innocent people are usually wrong or simply negligent to upgrade to large -scale network security issues.
The blockchain has a method of automatic recording transaction, which cannot be changed in the future. By using this technology, many manual processes will be eliminated, thereby reducing human errors, improving efficiency, and reducing the impact of network threats.
Can private blockchain and banking system coexist?
It is difficult to make choices between the two, and it is difficult to determine which of the two of the two will provide the ideal system for the future of the currency. However, some things are clear. For example, the banking system has been tested and tested. Although there are some problems, it is still effective. Cryptocurrencies have proven to be innovative and an important part of the future, but it has not been proven to be a reliable banking system.
In short, the banking system and private blockchain have their own advantages and disadvantages. Based on who is the best view of them, the third choice may be possible. This refers to the mutual dependence between the privacy blockchain and the banking system, which has begun to happen.
Developers have been studying hybrid blockchains. It combines public and private blockchains and can be used by banks and other financial institutions to provide financial services. An example is the blockchain of Ripple (XRP), which promotes fast transactions and is also aimed at achieving cross -border banking business.
As we all know, public blockchain is slow and expensive, while private blockchain has been criticized for encouraging cryptocurrencies for illegal purposes. The mixed blockchain aims to overcome these problems, and it is also possible to integrate blockchain technology to the banking system. Therefore, as banks and other traditional companies are more open to digital currency, cryptocurrencies may have a place in the future of the banking industry.
Summarize
The difference between blockchain and traditional banks, the centralization nature of the banking system and the fact that it depends on the database will produce weaknesses, making them more vulnerable to hackers. The centralized centralization has also caused the potential impact of the banking system during economic difficulties. The decentralization of the private blockchain plus the fact that the blockchain is almost irreplaceable to eliminate some problems, but the lack of centralization will cause governance problems.
However, blockchain technology is slowly but steadily entering the banking and financial services industries. It can also change the overall security of the banking industry. From remittances to securities transactions to cross -border payment, blockchain technology is expected to have a huge impact on the implementation of international transactions and the security guarantee of digital assets. Simply put, the blockchain will definitely take over the operation of the banking system. With a large number of benefits provided by it, if the bank does not start implementing the technology, they will soon be behind.
