Introduction
Blockchain is a type of“Database” that records digital events between different parties. It acts like a spreadsheet of transactions that updates the data on computers on the global network and serves as a distributed ledger. The ledger is encrypted and transaction it contains a scan to be verified by other computers across the network. It is a trusted network that can be private, public or hybrid. When we say about the word blockchain it derives from words. Block means“DIGITAL INFORMATION”, chain meaning“DATABASE” which means storing digital information in database Block-chain can be used in.
3category:
1]Blocksstoreinformationaboutdate, time, the amount spent on order from your recent purchases or Example Amazon
2]Block stores information like who is participating in the transaction. A block for your purchase from Amazon would record your name along with Amazon.com.Instead of using your name, it would use your unique“DIGITAL SIGNATURE” for transparency
3]Block stores information that distinguishes from other blocks. Each block stores a unique code called“HASH” which is very different from every other block. For example, if you purchase something product from Amazon but while you are in transit you decide to purchase other better products and you switch on to that product. Even though the details of the new transaction would look similar to the earlier one but the blocks area part due to unique code.
Application of blockchain:
BANKS, FINANCIAL INSTITUTIONS.
As the technology basically focuses upon how we look upon money, financial services are the earlier one to adopt this type of technology. Banks, financial institutions, brokerage firms are rapidly using these types of technologies to provide faster services to customers with more accuracy and adaptability. Traditionally transactions were regulated by central governing financial institutions but with the adoption of blockchain therein need for third parties. Thistechnologyalsobringstransparencyinmakingtimelyreports, recording transactions and elimination errors in the transactions. Further blockchain can enable“SMARTCHAIN” to simplify the there-conciliation contract. With this, the financial director scan ensures that transactions are carried out correctly and in provisions along with the various department of organizations. By implementing blockchain technology with advance systems such as ERP systems, the finance team scan manages each transaction under one roof. When the transaction is seen it can be immediately seen and the users do not have to wait until it gets transferred into the systems.Thisenablesfinanceteamstohavevarietyofanalyticalskills creating a real-time team.
CAPITAL MARKETS
Many times for entrepreneurs,large organizations or a startup the process of raising capital may be challenging. Organizations faces various risk such as market, liquidity and also stringent regulations. Blockchain helps for severe capital market use cases:
1Real time settlement of trade
There is ade fault risk due to a lack of a mechanism that positions various financial instruments on a realtime basis. For now, it is a clearinghouse that acts as intermediaries and absorbs the risk. However, due to these intermediaries, it has lead to an increase in settlements time to(T+2)days. However in the blockchain technology, once the transaction of trade is executed, the details are passed on to the Authorized permission network as a smart contract. The smart contract deals with the ledger position on the blockchain and does a real-time checking of the transactions. As the smart contract and ledger cannot tamper this process hence ensures trust, Viability, transparency settling on a realtime basis.
2 Party Collateral Management
Financial Institution engages a third party agent to manage their collateral exposure. This leads to the to-effective use of ultimately results in higher cost Unblock-chain again we can use the smart contract for collateral management solution. The smart-contract in this case within interrogates with these aggregated accounting positions and long boxes to complete the transactions. The allocated position is then maintained on a ledger on a real-time basis that can viewed by the investor and parties concerned. This will help to evacuate excess capital allocated as a cost by investor and bringing more liquidity and optimization for the parties
TRADE FINANCE
Trade finance is considered the lifeline of global trade business. The international chambers of commerce estimate that the global trade finance gap is around $1.6 trillion. This segment constitutes wherein, it bridges the gaps between exporter whore requires a guarantee, before they ship any product and also useful to importers wherein their products, are delivered on time. additionally, this sector is more affected by increased compliance regulations. With blockchain, multiple documents of the same database could be no longer stored on multiple database and therefor the approval need not be a sequel.Howevereachparticipant/ person associated update store elects the current transactions it removes the need to store multiple data into multiples databases thus creating havoc in transactions. Using smart contracts to codify the agreement could open the space for alternative financing and downstream factoring RecentlySWIFT(Society for Worldwide Interbank Financial Telecommunications)has announced to adopt blockchain to further adopt blockchain technology in trade finance. BankslikeHSBC, DEUTSCHE, and UniCredit are partnering one blockchain trained financial platform to adopt DIGITAL TRADE CHAIN to open accounts for trade globally.DTC allows authorized parties to keep a check on transactions
CONCLUSION
Fin-tech companies, financial institutions, and the government are experimenting with this type of technology. If the financial market adopts the distributed ledger technology it may have to make decision-based on game theories. Being an early adopter will always provide a competitive advantage over others but the companies shave to keep an eye on the cost involved and rate of acceptance in the business interest. With the current situation, the emerging market seems fertile for adoption by high demand serving in hedging technology through bitcoin and other cryptocurrencies.
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