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Blockchain, 20: redefining financial services (III)

Time : 27/10/2021 Author : gvtr8k Click : + -
        The previous article in this series focused on establishing the background to explain why moving the existing financial system towards a futuristic blockchain system is the next natural step in "currency" reform. We will continue to understand which blockchain features will help this migration. However, financial markets are very complex, and people's transactions are composed of many components, not just money. This section will explore which blockchain features can enable financial institutions to migrate to the blockchain platform and merge traditional banking and financial systems with it. As previously discussed and proved, if enough people participate in a given blockchain network and support the transaction protocol, the face value assigned to "tokens" will increase and become more stable.
        Take bitcoin (BTC) as an example. Just like the paper currency we are used to, cryptocurrencies such as bitcoin and Ethereum can be used for all the purposes of the former, from buying food to ships, even loans and insurance. In fact, the banks or other financial institutions you are involved in may have used the blockchain ledger technology. The most significant uses of blockchain technology in the financial industry are to establish payment infrastructure, fund transaction technology and digital identity management. Traditionally, the latter two are handled by the traditional systems of the financial services industry. However, due to the efficiency of blockchain processing, these systems are gradually migrating to the blockchain.
        Blockchain also provides these financial service companies with high-quality data analysis solutions. The reason why this aspect can be paid attention to quickly is mainly due to the recent development of data science. From the perspective of start-ups and projects at the forefront of this field, it seems that blockchain can be guaranteed, because the products of these enterprises or projects have begun to expand in the market. PayPal, an online payment company founded in 1998, is now the largest of these platforms and is often regarded as a benchmark for operational and technical capabilities. PayPal is largely derived from the existing monetary system. Its innovative contribution comes from how to collect and utilize consumer data to provide instant online services.
        Nowadays, online trading has been taken for granted, and there is little innovation in the technology based on it. Having a solid foundation is a good thing, but it can not provide any competitiveness in the rapidly developing IT industry. After all, there are new standards and new technologies every day. In 2014, Braintree, a subsidiary of PayPal, announced the establishment of a partnership with coinbase and gocoin, the popular cryptocurrency payment solution providers, to gradually integrate bitcoin and other cryptocurrencies into their service platforms. This basically gives consumers of cryptocurrency payment solution providers an opportunity to explore and experience under the reliable and familiar platform of PayPal.
        In fact, taxi companies Uber and Braintree have an exclusive partnership, allowing consumers to use bitcoin when taking a taxi. Ripple is making it easier for people to operate between multiple blockchains. Ripple has become the headline news of the development of banks in various regions in the United States. For example, without the need of a third-party intermediary, it bilaterally transfers funds to banks in other regions, thus reducing costs and time management expenses. Ruibo's codius platform allows the blockchains to operate with each other, and provides an easy way for smart contracts to be incorporated into the system to minimize tampering and confusion.
        Based on this advanced, safe and expandable platform, UBS has a customer list including UBS and Standard Chartered Bank, and more bank customers are looking forward to joining. Kraken, an American cryptocurrency exchange operating around the world, is famous for its reliable cryptocurrency volume estimation, and even provides real-time bitcoin pricing data to Bloomberg terminals. In 2015, they cooperated with Fedor bank to establish the first cryptocurrency bank in the world to provide banking services and cryptocurrency transactions. Circle, another financial technology company, is the largest of its kind, allowing users to invest and trade cryptocurrency derivative assets, similar to traditional money market assets.
        Today, companies like Wyre and stellar have reduced the lead time of international wire transfers from an average of 3 days to 6 hours. Some people claim that once an appropriate regulatory system is established, the same six hours can be shortened to a few seconds. Although the above contents are now focused on relevant start-up projects, the influence and ability of more respected old-fashioned financial institutions should not be ignored. These institutions with global trading volume of billions of US dollars, which have existed for decades or even hundreds of years, have considerable interest in using blockchain and its potential. As mentioned in the previous article, JPMorgan Chase recently disclosed their plans to develop cryptocurrency and enterprise level blockchain basic ledger.
        The project is called quorum and is defined as "enterprise level distributed ledger and smart contract platform". The main goal of this platform is to gradually migrate a large number of banking operations to quorum, thereby reducing the significant expenses of companies like JPMorgan Chase in ensuring privacy, security and transparency. They claim that they are the only players in the industry who have all the blockchain, protocols and token systems. They also released a cryptocurrency called JPM coin for large amount instant settlement. JPM coins are the first "stable coins" supported by major banks such as JPMorgan Chase. Stable currency is a cryptocurrency whose price is associated with existing major currency systems.
        Quorum is also praised for its nearly 100 transactions per second, which is much higher than that of its peers, which is far ahead of its peers. It is reported that Barclays, a British multinational financial giant, has registered two patents based on the blockchain, aiming to simplify capital transfer and KYC procedures. Barclays aims more to improve its banking operation efficiency. One application is to create a private blockchain network for storing KYC information of customers. After verification, storage and validation, these details will remain immutable and no further verification is required. If this application can be implemented, the protocol will eliminate the need for multiple verification of KYC information.
        In a developing country with a high population density such as India, the KYC information of most of the population has not been introduced into the formal banking system. If this innovative KYC system can be introduced, it will help reduce random errors and reduce delivery time. It is said that Barclays is also exploring the functions of the blockchain system to solve the problems of credit status rating and insurance compensation. This system supported by blockchain is used to eliminate unnecessary maintenance costs and use smart contracts to win competitiveness in the industry for enterprises that need caution, security and speed. These enterprise products are based on an agreement that can ensure complete transactions and contract privacy, and a consensus mechanism that can invalidate corruption and bribery.
        PwC's 2017 global fintech report indicates that by 2020, about 77% of all fintech companies will turn to blockchain based technologies and processes. Up to 90% of the respondents said they planned to make blockchain technology a part of the production system by 2020. Their judgment is correct, because from the perspective of regulation, significant cost savings and increased transparency can be ensured by transferring to the blockchain based system. Since the blockchain platform has built-in regulatory capabilities by default, it is also a welcome move by industry regulators to move enterprises from traditional systems to modern networks running blockchain ledger.
        Transactions and trade movements can be verified and tracked once and for all. In the long run, this may lead to better regulation and risk management, not to mention improved corporate and individual responsibilities. Although the investment in leapfrog innovation is incidental to the large amount of investment made by enterprises, it is misleading to think that these measures will not penetrate into the interests of end users. As banks and financial institutions begin to adopt blockchain, this will bring them more cost savings and efficiency, which will ultimately benefit end consumers. The additional benefits of transparency and fraud protection will improve customers' feelings and, more importantly, enhance people's trust in the banking and financial system.
        Through the integration of blockchain and traditional services, the much-needed revolution in the financial service industry will become possible. In the next part of this series, we will discuss the blockchain in real estate.
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