A blockchain is an unidentified online
ledger, which uses information structure to justify the way you transact. It
also permits its customers to influence the ledger in a secure way without the
help of a third party. A bank’s ledger is connected to a centralized network. But,
a block chain is anonymous, protecting the identities of the customers. This
helps to carry out transactions in a more secure way with the blockchain. The algorithim
used in blockchain diminishes the dependence on people to authenticate the
transactions. This technology used
for several transactions has the possibility to interrupt the financial system.
How it works?
Block chain facilitates two
entities that do not know each other to agree that something is true without the
necessity of a third party’s interference. As against to writing entities into
a single sheet of paper, a blockchain is a distributed database, which takes several
inputs and places them into a block. Every block is then ‘chained’ to the
subsequent block using a cryptographic signature. This permits blockchain to be
used as a ledger which is reachable by anyone with approval to do so, according
to a market research.
Why are banks interested?
All main banks are conducting trials
with blockchain as they can use it for record keeping, money transfers, and
other back-end functions. The paper -intensive worldwide trade finance procedure
as an electric decentralized ledger that provides all the participating entities
is duplicated by blockchain application, including banks, the ability to access
a single source of data.
It also allows them to track
documentation and verify ownership of assets digitally, as a permanent ledger
in real time. Infosys and TCS, the Indian IT service providers are increasingly
incorporating the use of blockchain technology. Two of these companies, for banks are utilizing blockchain system
to make core banking platforms.
Is It Safe?
Blockchain permits financial
institutions to perform and validate transactions confidentially devoid of any
human intervention. The blockchain’s USP is that it permits two parties to perform
a transaction without any mediator.
The electronic ledger of
transactions is constantly maintained and verified in ‘blocks’ of records. Professionals
believe that blockchain architecture can importantly bring down the costs and
enhance effectiveness in the financial sector. Through cryptography, the
tamper-proof ledger is shared between parties on computer.
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