Since Bitcoins and Altcoins have started their journey to fame and recognition, let’s dig-in a bit deeper to know more about the most basic yet the most technically complex component of this extraordinary maneuver.
It’s really important for us to keep in mind that what we are witnessing at present is more of an evolution than a revolution, thus once used in harmony with the social fabric it holds tremendous potential to unleash dimensions that would transform our daily lives forever.
Blockchain Technology is the backbone for the Cryptocurrency operation. Yet cryptocurrency is not the only extent of this marvelous technology. It has a potential to incorporate anything and everything, that one can think off, under its ambit!!.
The financial aspect of the Blockchain technology has matured quite significantly in comparison to it’s application in other fields Thus the time is not far when we would realise the true significance of this innovation when we would get to dwell with this more often in our daily lives.
In its financial form It is a decentralized public ledger which allows the users to manipulate the same by transacting (includes both sending and receiving cryptocurrency). This technology holds up the information most securely and this information is held anonymously and without any dependence and control by an external third party.
BLOCKCHAIN may not sound the most sonorous word yet carries a tremendous potential to alter money and market that we have been dealing with in the past. A technology that already exists among us though we are not much accustomed to this up-and-coming technology so far.
Blockchain has the ability to handle and settle the transactions securely and faster in a decentralized environment.
For instance, In the month of October 2016, ICICI bank announced that it settled an export transaction in partnership with Emirates NBD, with Blockchain technology, in minutes which would have taken around 3 days via existing conventional route.
Blockchain technology offers adaptable, decentralized and most secure platform to carry out financial transactions This not only makes it suitable for crypto currencies but also to the banking transactions, remittance management etc.
Now that we are already witnessing the prudence of this digital evolution in the financial niche let venture the other aspects that even further widens the horizon of possibilities.
Smart contracts are digital transaction protocol which aims at performing or negotiating the contract terms for e.g. enforcement of the contract or payment etc. These smart contracts reduce the chances of malicious extra ordinary events and eliminates the need for any intermediate entities.
Smart contracts complement or work in place of legal contracts which has contract terms written in software codes which are executed and enforced by itself. As far as, technicality goes, Smart Contracts help the users to transact online without any help from intermediaries.
Smart contracts involve coding i.e. programmed in computer language. The programmers input the logic into the coding of the smart contracts, which results in predefined approach in response to execution and enforcement of contract terms.
Once the smart contracts are coded, they are moved forward to the distributed ledgers for e.g. R3 distributed ledger or Ethereum etc.
Once these smart contacts are forwarded to other computers on the network through distributed ledger, all those computers arrive at consensus with respect to execution of code. Once obtained consensus, computer network updates the distributed ledgers with code execution. However, once the distributed ledger is updated, there is continuous observation and enforcement for compliance. Point to be noted is that at any single point of time, no smart contract is handled by a single party. This is in line with decentralization feature as afforded by blockchain as smart contracts.
Why do you need smart contracts?
- Reduced risk level
Since, all smart contracts are handled without any intermediaries, decentralization is exercised fully. This raises up the security level as code execution is predefined and predetermined (if this happens then do that – kind of execution), which takes place automatically.
- Faster processing
Due to high level of automated task execution, every task gets finished in lesser time than manual processing. This has resulted in real time updation to the network of distributed ledgers.
- Minimal intervention by third party
Since transactions are not handled by any single party and whole processing is decentralized, there is no need of fear and insecurity which surrounds escrow transactions.
- Global applications
Blockchain as smart contracts is unique and most flexible form of transaction processing. So, this technology can be applied to all and every field. For the exhaustive list, we can have a look at use cases mentioned below.
Blockchain technology the helm of financial revolution
- Securities transaction
There are many entities involved in squatting off or performing securities transaction, which are DP, broker, clearing house etc. However, if the smart contacts are used is securities settlement or dividend payment etc. then it would cost lesser and would be real time.
Famous Delaware Blockchain initiative has already started switching to smart contract based securities settlement. The company called as “Symbiont” has started using stock certificates as first phase for migration and has been using cryptographic signature for the same.
- Trade finance
Smart contracts make it easier to bring the international trade settlements, especially with respect to letter of credit and payment processing. RTGS settlements can increase the level of security and can work at real time speed.
Bank of England is experimenting with an idea of using smart contracts AKA blockchain strategy for enhancing the speed and security feature of its RTGS. The most important component of their upgraded payment clearing system would be using distributed ledger based processing for efficient processing.
Syndicated loan market can use smart contracts to streamline the interest payment schedule, lending approval system etc. which would bring in the cost savings as well as raise the speed up.
Credit Suisse, Ipreo, Symbiont, R3 have successfully completed the first stage of use of blockchain for improving the syndicated loan processing.
- Digital identity
Smart contracts can help protect the digital identity of the person with respect to electronic assets, personal and confidential data (like bank accounts). Context sensitive report making and presentation will be encouraged when we use smart contracts for evidencing digital identity.
Smart contracts can help a great deal in streamlining in transferring the deed of ownership or property transfer which contains lot of procedural formalities. By automating these tasks, speed will increase due to lesser human intervention.
Honduras as well as Georgia governments have adopted smart contracts AKA Blockchain technology for maintaining their land records. This has ensured maximum safety and confidentiality even if it grants immediate and real time access and availability of data.
The list is unending and even more amazing, since this blockchain technology can be applied to any industry but only with proper ground rules and lucid regulations to deal with and anomalies and need that may come up as challenges in the times to come.
The power of BLOCKCHAIN technology has already started showing up the glimpse of the world, we are heading towards.
It provides a vast distributed virtual network over millions of interlinked computer system around the globe that is owned by none but available to everybody for validation.
This platform comes with diverse functionality where all kinds of assets from money to music could be stored, moved, transacted, exchanged and managed without any intermediaries.
Any digital assets ranging from money to music isn’t stored in a centralized place but made available, in an encrypted format, for validation to millions of eyes on the internet. This relieves the burden of book-keeping, also minimizing the threat of potential hacking.
An advantage of this public ledger is that it is tamper proof and hence data is not vulnerable to external threats.
Currently, Honduras Government has been maintaining land records on Blockchain, hence, in case of any modification or changes, it gets published real time and publicly.
This revolutionary technology has embedded trust among people worldwide. Now they can transact peer-to-peer without actually losing control over their hard earned fortune, at any phase of transaction. The reason for this trust isn’t some big institutions anymore but rather its technological collaboration with millions of computers worldwide.