What Is Blockchain? The Financial Sector Revolution
Blockchain technology breaks into the financial market with great force and transforms the traditional pillars of our society. It influences the functioning of the economy and business, outlining new models and structures for the financial industry.
And it is that according to the report published by GP Bullhound this 2018, it states that blockchain technology companies obtained a total of 3,334 million euros through ICOS in 2017, five times more than what was achieved with venture capital funds, and 47 times more than the 80 million raised the previous year through this technology.
Blockchain is the technology that develops Bitcoin and allows it to eliminate intermediaries and store transactions safely. For this reason, large companies and banks (and some startups too) are already exploring their possibilities. Do you want to know what this innovative technology consists of?
Table of Contents
What Is Blockchain?
Blockchain is a technology based on a decentralized and public blockchain of operations. This technology generates a shared database to which its participants have access, which can track every transaction they have made. The programmable and open nature of this technology allows innovation in the financial sector and administrative processes to make them more efficient and transparent. Also, the bureaucracy is decreased. Blockchain is the technology that developed Bitcoin, the virtual and intangible cryptocurrency that is supported by the protocol and the P2P network.
To make it easier, we can compare Blockchain technology with a large accounting book in which all transactions are recorded, with the addition that the data cannot be manipulated and, in addition, is verifiable.
The main advantages of this new technology are that transactions can be stored safely and verified without the need for third parties (intermediaries).
Another of its reasons for being is to reduce fraud in operations. All participants have access to the transactions, and a consensus of all is needed to modify them. This generates business confidence, something that until now had been difficult to achieve online. Additionally, being a public blockchain, transaction security is protected as everyone has access to a single source of shared trust.
One of the facilities provided by Blockchain is to be able to carry out an economic transaction from Spain to any country in a time of between five and ten minutes. But it can also be applied, for example, to finance movements of “stock” or sign smart contracts.
Ultimately, Blockchain processes are streamlined and cheaper, transactions are more transparent, and intermediaries are eliminated.
How Does The Blockchain Work?
The blockchain is a record of all transactions, stored and shared publicly. The so-called miners are responsible for verifying those transactions. After that, they are included in the chain and distributed to the nodes that make up the network.
Let’s See What Each Of These Elements Consists Of:
1 # Blocks.
A block is made up of a set of transactions. Each one is part of the blockchain. The Bit2me company, which specialized in Bitcoin and its technology, defines each of the parts that make up a block:
- An alphanumeric code that links to the previous block.
- The “package” of transactions includes (whose number is determined by different factors).
- Another alphanumeric code that will link to the next block.
The next block in progress is trying to find out the alphanumeric code that allowed the previous block to link to it.
2 # Miners.
Miners are computers/chips that are responsible for verifying all transactions. When someone completes a block or performs a transaction, they receive a reward in the form of Bitcoins.
3 # Nodes.
A node is a computer/chip that is connected to the Bitcoin network. It is dedicated to storing and distributing an updated copy of the blockchain. Therefore, each new block that is committed is added to the blockchain and to the copy that each node stores.
Also Read: Reliable Methods To Do Bitcoin Sell Anywhere
Banking Institutions Are Betting On Blockchain Technology
This technology is already being applied in many sectors, but the ones who are currently exploiting it the most are banks. Several studies at the time ensured that 15% of banks and 14% of financial entities plan to introduce Blockchain solutions and technologies in 2017. And it is expected that in 2020, 20% of global companies will integrate this technology. In reality, what banks are seeking is to implement techniques to eliminate intermediaries and mistrust in transactions.
BBVA, Bankinter, and Banco Santander are some of the big banks that have detected an important source of investment in Blockchain technology. They are beginning to install this system in their transactions, to improve process security and eliminate the costs of traditional transactions.
Blockchain Reaches SMEs
Small and medium-sized companies represent about 75% of the total companies that make up the economy, according to data from the 2015 Report: sector analysis of the introduction of ICT in Spanish companies. This data shows that SMEs are a fundamental pillar of the financial industry in our country, so all the technological innovations they develop will have a crucial impact on the current economic model.
A report reveals that 85% of entrepreneurs assure that the turnover of their companies will increase and only 2% believe that sales will decrease. This happens, among other factors, because SMEs have detected the need to go through a process of digital transformation and, therefore, to investigate ways to open new business models adapted to the digital age.
Some startups are leading the introduction of Blockchain technology. They use it as a method to decentralize and let users control their own movements, without the need for third-party intervention.
For example, Storj is a startup that has developed a beta version of a service that allows the creation of a decentralized database, using Blockchain technology, to increase security. To understand it, it would be like cloud storage services, such as Dropbox or Google Drive, but, unlike them, in this case, there is no single provider that is responsible for the data that is stored.
Another possibility offered by Blockchain is the creation of Smart Contracts. It consists of automating the processes of a business (payments, suppliers, supply) through a virtual machine that stores and manages the information. The machine becomes the person who talks to providers and makes payments.
Do You Want To Specialize In Blockchain?
As we see, the development of Blockchain technology is still in an embryonic phase. But more and more companies are detecting their potential and the opportunity to welcome new business models in a new financial environment.
We will see if this technology will have the power to change our relationship with the digital and financial world. Did you know this technology? If you are interested in Blockchain technology, do not hesitate to comment and leave us your opinion.
Related Article: The 10 Blockchain Trends In 2020