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What is blockchain technology and its application in the financial industry

Time : 08/03/2022 Author : 4l7xsg Click : + -
        In recent years, blockchain has been highly praised by professionals in the Internet and other fields, and is widely praised as one of the basic protocols for the next generation of global credit authentication and value Internet. On July 20, Borsa Italiana, a subsidiary of the London Stock Exchange Group, completed the development of the blockchain platform, aiming to simplify the stock issuance and access to capital for small and medium-sized enterprises. The platform is supported by hyperledger fabric 1.0. Blockchain is a new application mode of computer technology such as distributed data storage, point-to-point transmission, consensus mechanism and encryption algorithm. The so-called consensus mechanism is a mathematical algorithm in the blockchain system to establish trust and obtain rights and interests between different nodes.
        Blockchain is an important concept of bitcoin. In essence, it is a decentralized database and the underlying technology of bitcoin. The blockchain is a series of data blocks generated by using cryptography methods. Each data block contains the information of a bitcoin network transaction, which is used to verify the validity of its information (anti-counterfeiting) and generate the next block. The so-called blockchain technology, abbreviated as BT (blockchain Technology), also known as distributed ledger technology, is an Internet database technology characterized by decentralization, openness and transparency, so that everyone can participate in database records.
        If the blockchain is regarded as a state machine, each transaction is an attempt to change the state, and each consensus generated block is the result of participants' confirmation of the state change caused by all transaction contents in the block. Generally speaking, if we assume that the database is an account book, reading and writing the database can be regarded as an act of bookkeeping. The principle of blockchain technology is to find the fastest and best person in a period of time, and this person will be responsible for bookkeeping, and then send this page of information of the account book to all other people in the whole system. This is equivalent to changing all the records in the database and sending them to every other node in the whole network. Therefore, the blockchain technology is also called distributed ledger.
        In essence, blockchain is a mathematical solution for the construction of trust mechanism of trading parties. At present, it is not mature in application and faces many challenges. However, once the idea of reconstructing the credit formation mechanism is successful, this technology will profoundly change the current financial formats and business models, and may fundamentally change the transaction rules between institutions. Although blockchain technology is a complex technology, what is more complicated is the rules designed for its application. Regulatory authorities and financial institutions should pay close attention to the development trend of blockchain technology, strengthen research and technology reserves, actively participate in the exchange and discussion of rules and standards between relevant parties at home and abroad, and prudently carry out practical application verification.
        One of the characteristics of blockchain technology is decentralization. However, in a decentralized business system, centralized departments are also required to provide norms and rules. It is suggested that the people's Bank of China take the lead in setting up an organization, strengthen the cooperation between the central bank and financial institutions and Internet professional institutions, carry out research on financial application scenarios of blockchain technology, and organize some financial institutions to carry out some joint experimental applications first. In addition, regulatory rules and technical application standards should be established at the same time to avoid barbarous application, which will have adverse effects on society and cause risks to financial operation. At present, the Internet Financial wave is changing the existing financial business model in the world. However, whether it is Internet banking, Internet insurance, or internet securities companies, they are only changing the business model, not the financial structure.
        However, blockchain technology believes that it will make the next upgrading of the financial industry closer to the essence of Finance & mdash& mdash; credit Theoretically, with sufficient technical identification capability, blockchain technology can enable both parties to carry out economic activities without the help of a third-party credit intermediary, so as to realize global low-cost value transfer. Blockchain technology may be applied to digital currency, bills, clearing and settlement, equity trading, auditing, notarization and other fields in the future. Digital currency represented by bitcoin is the most widespread and successful application of blockchain technology. Compared with traditional paper currency, issuing digital currency can effectively reduce the cost of currency issuance and circulation, and improve the convenience and transparency of economic transactions.
        Therefore, in the Internet age, it is natural that blockchain is an optional technology for the central bank to launch digital currency. In the bill market, the digital bill realized based on the blockchain technology can become a safer, smarter and more convenient bill form. The point-to-point transaction realized by the blockchain can break the existing function of bill intermediary and realize the disintermediation of bill value transmission; Based on the immutability of the information of the blockchain, once the transaction of the bill is completed, there will be no repudiation, so as to avoid such behaviors as "multiple sales of one ticket" and asynchronous payment and endorsement, and effectively prevent the risk of the bill market. Based on the time stamp formed by the connection of the blockchain data, its completely transparent data management system provides a reliable traceability path, which can effectively reduce the audit cost of supervision.
        The expansion of the distributed clearing mechanism brought by the blockchain technology, if applied to inter-bank clearing, can reduce a large number of management costs and improve the efficiency of clearing. At the present stage, commercial trade transaction settlement and payment must rely on banks. The traditional transaction methods must pass through the Bank of deposit, the Bank of deposit of the counterparty, the domestic clearing organization, the international clearing organization, the overseas bank, etc. in the process, each institution has its own accounting system, and needs to establish an agency relationship and a credit line; Each transaction needs to be recorded in the bank, and also needs to be cleared and reconciled with the counterparty, resulting in slow speed and high cost. Compared with the traditional payment system, the payment through the blockchain technology is directly completed by both parties of the transaction, without involving intermediate institutions. Even if some nodes in the network are paralyzed, the operation of the whole system will not be affected.
        If a general distributed inter-bank financial transaction protocol is built based on the blockchain technology to provide cross-border and any currency real-time payment and settlement services for access banks, cross-border payment will become convenient and low-cost. The application of blockchain technology in payment clearing is not far away. At present, swift and non bank payment institutions have faced the challenge of new blockchain technologies. Some blockchain start-ups and cooperative institutions have begun to put forward some new clearing and settlement standards. For example, the R3 blockchain alliance has been developing standards for interactive settlement. In addition, ASX has considered using blockchain to replace the original clearing and settlement system, and will start upgrading the clearing and settlement system at the end of 2016.
        At present, major Australian banks have joined the blockchain project run by R3.
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