What is Blockchain? How Can It Affect your Finances in 2020?

Blockchain is a technological innovation that allows digital information to be shared, not copied, with a transparent audit ledger that records changes but preserves the integrity of the unit. This means nothing can be erased from the ledger but more data can be added in the form of data blocks. Blockchain is revolutionary because it helps manage risk, identify fraud, and increase transparency in a scalable manner. It has significantly affected the finance sector, changing the way their services and systems operate.

To grasp the global uptick in the adoption of the technology, the global Blockchain market is expected to increase by 80% between 2018 and 2023, from $1.2 billion to $23.3 billion, reports ReportLinker.

What makes Blockchain so popular? Among the core fintech challenges Blockchain addresses are trust and shared data access. It provides a solution to data being confined in silos as well as the lack of a single, high-quality updated version that anchors copies.

Traditional banking systems have a central authority, such as the main bank office or headquarters that controls all actions and data within their systems and governs the policies and processes of their many branches. This can render the bank very vulnerable, especially if the main methods of control are in one system. A hacker that can get through its system and obtain the names and other sensitive information of its millions of depositors.

In contrast, Blockchain is decentralized. Millions of computer users in various locations throughout the globe can add or change data, make payments, and record financial transactions. Hackers would be hard-pressed to keep track of all of them.

Aside from the security it offers, Blockchain also offers transparency of all the activities done in its system. Because each movement is recorded and can be viewed, traceability of its transactions, communities, and all parties involved is efficient and accurate.

Blockchain is often linked to crypto-currencies such as Bitcoin but offers a wider range of applications and benefits because of its aforementioned distributed and decentralized nature. Here are some of the core challenges in the finance sector that blockchain has provided answers to:

• Issue: Data integrity and quality Transactions made across the network are approved by multiple entities, reducing human involvement in verifications, thus effectively lessening human error. This results in a more accurate information record; the occasional error done in one block would not spread to other blocks
• Issue: High-system costs. Using a digital system eliminates verification costs and other associated expenses. With no central authority, there are little to no processing or transaction fees. On the back end, a streamlined e-system would not require as much human intervention, making personnel teams lean.
• Issue: Low Productivity. Traditional paper-heavy processes can be extremely time-consuming and prone to human error. Blockchain paves the way to automation, allowing transactions and other activities to be completed at a faster rate. Outputs in the different banks using blockchain can increase.
• Issue: Security Companies put a premium on the protection of customer and internal data. Oftentimes the physical infrastructure requires servers, security systems, and personnel—all of which require funding. Blockchain, given its digital system, is a secure software system that is not easily hacked or invaded.

Organizations all over the world have realized the benefits of blockchain technology and its possibilities. Some heavy hitters such as Nestle, Dole, Unilever, and Tyson Foods have a partnership with Walmart to utilize blockchain in the food industry. According to Fortunly, Blockchain has helped Walmart trace products to their original farms within 2.2 seconds, which would have taken at least six (6) days without the technology.

De Beers, the diamond firm that controls more than a third of the world’s diamond production, is using a Blockchain-based supply chain to track the origins of diamonds for authenticity. It also uses Blockchain to ensure gems are not sourced from war-torn regions where exploitation of miners occurs.

However, the uses of Blockchain are not limited to the private sector. The state of West Virginia has used Blockchain technology for electronic absentee voting through a mobile app that allows military members to cast their votes while stationed overseas. This reduced election fraud and increased voter turnout due to accessibility. Votes are stored in the Blockchain, making them practically impossible to be tampered with while maintaining transparency and human intervention.

Blockchain has a wide range of applications that still have to be optimized: from stock trading, crowdfunding, supply chain auditing, file storage, anti-money laundering, to data management, among others. It has become the technology of the future with its capabilities along digital payments, trading, smart contracts, and identity management. The technology carries a strong infrastructure that will make transactions more efficient and effective all the while offering greater transparency, security, and traceability.