Save money with blockchain technology
When Satoshi Nakamoto invented bitcoin, in addition to creating the concept of cryptocurrencies, Blockchain technology was developed, which became in demand around the world. A chain of blocks allows data transmission in a more efficient and decentralized manner using a system that not only stores information in a central registry, but also distributes it between network nodes in real time. In practice, this represents a cost savings.
Banks saw the benefits of this system in the process of digitizing and accelerating adaptation processes to this new technology. An IBM study showed that around the world, 15% of banks and 14% of financial institutions plan to implement blockchain solutions and technologies in their work in 2018, and more than 65% of world banks will do so over the next three years.
What is a distributed ledger system
Blockchain is a general data logbook for many people, where each person has a copy of this book. The entire database in a network of distributed registers is distributed between different participants, it is cryptographically protected and organized in blocks of transactions connected mathematically. If there is a change in one of the records, it appears in each copy of this transaction.
Luis Sabaric, a spokeswoman for IBM blockchain, points out that Blockchain technology is based on encryption methods that create a system that can transmit information in a decentralized way when only the sender and receiver know about the existence of a transaction between them. At the same time, every member of the Blockchain network can see that this transaction has taken place. Each transaction is “unique, inimitable, unchanged,” says Sabarich. If desired, the identities of the parties can be maintained anonymously by the system.
Benefits of Blockchain Technology
“This technology introduces new products that can make important changes in digital relationships between people,” says Sabaric. The solutions created on the Blockchain network go beyond the concept of bitcoin; these may be applications for:
5. The public sector.
6. Areas of finance.
Banks are already developing their own projects for creating cryptocurrencies, new transfer or payment systems in real time. In the case of the health sector, this system can be used to manage medical records. In the energy sector, it can be used to buy energy from a producer.
Why are banks interested in blockchain technology
Currently, many banks around the world have deployed a series of servers where the information in them is duplicated for many other banks and institutions. To update information from one database of one bank to another, the messaging processes in the Blockchain network are used.
When many banks have a system with duplicate information, significant savings will be achieved, as well as flexibility in some processes that require verification.
One of the applications working in the blockchain system may be the implementation of international transfers. For example, when a client requests to transfer money from a rural bank to an American bank, the process of negotiations between several organizations is open until, finally, a price agreement is reached. With a blockchain, money will be transferred directly.
Projects built on the blockchain network
Experts note that Blockchain technology is still at the first stage of its development. In addition to technological evolution, normative evolution is necessary for the use of this system to find a structure in which the obligations and rights of users and companies are developed.
In fact, one of the problems with Bitcoin was that it was connected with Internet payments for illegal activities or with money laundering. The blockchain is not something visible to the end user, but it is this technology that is behind the applications that it uses.
Bank Santander announced its cooperation with banks UBS, BNYMellon, Deutsche Bank, ICAP market operator. This collaboration involves the launch of the Clearmatics project and the development of the blockchain payment system. These banks invest millions in blockchain technology and seek to create their own cryptocurrency, which these institutions will use to carry out transactions between themselves. This agreement between banks was important for these institutions.
For example, the R3 consortium, within which about 70 legal entities and financial organizations are grouped, began to study the issue of creating an intra-system cryptocurrency for banks. In the international arena, Microsoft and Bank of America have entered into a cooperation agreement to develop blockchain technology to help transform financial transactions.