Blockchain technology has turned into a force that is disrupting the global financial market, particularly within the finance and banking industry. American Fintech Council (AFC) recently published its white paper on The Impact of Blockchain Technology on American Fintech which sheds some light on this topic. Key players in this industry have already witnessed the power of blockchain technology, and are now fully behind it, as evidenced by statements from various providers like Nasdaq, Capital One and others involved in the world of finance and banking.
What is blockchain technology?
A blockchain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly. The technology, created by Satoshi Nakamoto (an alias for an anonymous person or group) provides a way to record, transfer and store data securely. First developed as part of the digital currency bitcoin in 2009, blockchain has spawned a number of other applications beyond its use with cryptocurrencies—for example, it has been used to timestamp documents and verify transactions without a middleman.
How does it work?
In a blockchain-based payment system, there are no intermediaries. That means transactions go directly from one party to another through a secure network, rather than through a central server. The network consists of computers that keep track of all transactions and prevent fraud by verifying each transaction before it’s added to a block (the latest transaction) on a digital ledger.
Two parties set up a transaction and agree to how it will be carried out. They both then add their own digital signature (called a public key) to the transaction, which can only be unlocked using a secret private key. This way, each party can send money from one account to another without having to go through an intermediary – keeping fees low and preventing fraud.
How will blockchain change fintech?
Blockchain technology can help better track where money is coming from and where it’s going. It should eliminate a lot of money laundering as well as that concept called trash banking or pyramid schemes. This will make life easier for consumers, but there are other benefits too.
The blockchain will allow people to invest in anything they want with ease, rather than being restricted by banks who decide what you can invest in. This makes investing more accessible to everyone, not just those with money. In addition, companies are also able to get funding easier through blockchain because investors won’t have to go through banks and other intermediaries who charge fees for their services.
3 Ways Blockchain Can Help American Fintech
As blockchain technology continues to gain popularity and attention, many companies are beginning to explore how it can improve their business. However, despite being such a hot topic in finance, many executives remain unsure as to how they can apply blockchain technology to benefit their company. Fortunately, there are three ways that you can use blockchain technology to help your fintech company: 1) Reduce costs associated with financial transactions; 2) Provide greater transparency and security for financial transactions; 3) Improve efficiency when making payments.
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