Sunday, 10 June 2018

The Use of Blockchains in the Financial Industry

The use of blockchains is like being a part of a WhatsApp group where everyone is an admin and the messages sent over the group cannot be deleted once they have been floated. The blockchain community is a fast growing community that has attracted various start-ups and well-established companies because of its decentralized management technique and distributed ledger technology. The hottest block chain companies offer blockchain based solutions, identity solutions, smart contracts solutions, and team extensions for blockchain projects. 
What is the job of blockchain?
  1. Two disparate companies can exchange information with the help of autonomously managed blockchain ledgers that are connected on a peer to peer network which is combined with a distributed time stamping server. The need for an administrator eliminates because everyone connected to the blockchain network is essentially an admin.
  2. Smart contracts can be automatically executed between two parties using blockchain. For example, when it comes to Ethereum Ether users, some predefined conditions need to be met that prove that the party claiming to own a particular amount of money actually owns that amount before a transaction deal is signed between the part at the other end. Blockchain developers can design contracts that require a predetermined set of inputs to trigger the transaction.
  3. Cryptographic hashing is used by the block chain companies to create an impact on the next block in the chain. When the block is completed, it contains a unique security code that binds it to another block which ultimately creates the chain. It is like a situation containing coded magnets, where only a south-pole to north-pole orientation can secure the magnets together.

What are public and private blockchains?
Even with the wide variety of blockchain permutations, blockchains are broadly classified into public and private blockchains.
  1. Public blockchains are those blockchains where all the members of the blockchain can view the details of deals and send or receive any transactions as long as they are a part of the consensus process. Consortium blockchains authorize a predefined number of nodes to utilize the ledger. For example, trade clearing by a group of banks and their clearing house can be performed by using a blockchain and each node is associated with a step in the verification process.
  2. Private blockchains restrict the access of data to only one organization such as all the employees in a company or all the banks that are participating in a network partnership.
  3. In both cases, the blockchain reduces the tedious amounts of record keeping which can create multiple copies if many companies are connected to the network and cause loss of data or redundant data generation.    

An example of industries that use blockchain-

Consider the shipping company. When a shipment or cargo is sent from one location to the other, there is a hierarchy of people that sign off the paperwork of the shipment before it actually lands in the correct location. Even electronically, these signatures by various authorities and inspectors are required. This leads to a long and tedious administrative process. Blockchain-based ledgers can be employed to manage and track the paper trail of millions of shipping containers which are a part of a digitized supply chain.  

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