Blockchain technology is a data management platform that uses complex cryptography to power many decentralized cryptocurrencies. Blockchains are digital ledgers and accounting systems that allow for auditing. They distribute the most current versions of the ledger data to all network devices, making them distinct from traditional databases. It’s almost impossible to alter the information once it’s on a blockchain network. All devices would have to agree to the changes.
It was Bitcoin that was the first to use Blockchain. This product facilitates digital money transfers without a central authority such as a major banking institution. To add new data to the network, the protocol uses computing power from all devices (called mining) and rewards miners who contribute with bitcoins.
Hacking is impossible because of its complexity. To hack it, someone would need to have control of at least 51% of the computing power on the network.
Fintech and Blockchain to Replace Traditional Financial Institutions
For many reasons, traditional financial institutions might only disappear partially. However, banks are the best way to protect yourself from theft and fraud.
You can also store your cash in any country with a stable currency. This is impossible with blockchain platforms due to volatility in the cryptocurrency market. Many people are uncomfortable with cryptocurrencies because they fear that these new currencies could have an unstable value and negatively impact their financial future.
1. It creates a digital ledger
Blockchain is similar to an accountant’s general ledger.
Pages in a ledger record transactions are annotated and time-stamped. A blockchain digitally records the entire money cycle, from its flow and change through time, by stamping each transaction chronologically and documenting them.
It is vital for the accounting and banking industries, where accurate records are essential.
It automatically records transactions, which means that Blockchain dramatically improves efficiency and reduces the time required to register them.
2. It guards against fraud
Blockchains are also decentralized. This means that no one can control the chain. Blockchain cannot alter it in any manner. Distributed ledger technology records every transaction or blocks via a node, which can be any smartphone or computer. This provides a considerable level of protection against fraud.
3. Revolutionizing KYC
Currently, identity verification and trust are handled by incumbents and intermediaries. However, Blockchain can alter or eliminate the trust component central to our financial system.
As a single digital entry, Know-your-Customer will be distributed throughout the network to eliminate duplicate entries and verify. These security improvements will directly assist sectors such as retail banking, wholesale banking, investment banking, payment networks: equity crowdfunding, asset managers, broker-dealers, regulators, and lending marketplaces.
4. Payouts without Borders
Blockchain’s revolutionary feature is its ability to support borderless transactions using its decentralized currency. Because it costs less to transfer funds between accounts, blockchain technology can make payments faster and easier. In addition, blockchain transfers do not require authorization from mediators, and banks don’t have to allocate resources for funds transfer. It means that international payment processing fees are much lower.
Blockchain will allow for better currency flow worldwide. For example, banks typically charge 10% to 15% for remittance fees. However, Blockchain can lower this number to as low as 3%.
As we have already mentioned, blockchain payments are highly secure, as all participants in the transaction must approve for it to proceed. Anyone can also check the updated ledger to see the transfer details.
Additionally, there is no need to transfer funds to third parties. This makes it possible to use P2P transfers for leverage transactions. It allows banks to compete against fintech startups helped by fintech app development company and generate their suite of fintech services.
What does Blockchain mean for insurance?
Fraud is a significant concern in property and casualty insurance claims. Long-term claim assessments can take time and effort. Blockchain secures data verification, claims to process, and disbursement. This reduces processing time by allowing for security. It allows:
- Authenticated documentation, KYC/AML data, and KYC/AML data reduce fraud risk and facilitate claim assessments.
- Smart contracts allow for automated claims processing.
- Automated parameterized contract to pay out on the occurrence of certain risks
- Automated disbursement for insurance payments
- Tokenized reinsurance markets are created to allow policy reinsurance in open markets. It is a step away from relationship-based and traditional broker systems.
Fintech is booming To be an influential force in modernizing traditional financial institutions. The past ten years have seen us move faster to a cashless society with more investment options and options for storing wealth than ever. The emergence of blockchain technology will help to boost fintech’s development by fintech app development company. It will make it possible to truly decentralize finance and allow individuals to manage their wealth independently of mediators or large institutions. If you need a fintech app for your business, contact a mobile app development company in Kuwait and develop your app soon.