Five ways banks are using blockchain
Banks are constantly seeking new ways to use blockchain technology to transform sizeable chunks of their business. The top five ways banks are using blockchain technology are: Clearing and settlement, payments, trade finance, identity and syndicated loans – which are all ripe for modernising.
Invented in 2008, blockchain technology stands to completely change business and banking. By employing an ‘open ledger’ methodology where all users or ‘nodes’ have a copy of the same blockchain; the transfer of data, assets and money becomes cheaper, faster and virtually incorruptible.
Blockchains are databases where the data is linked cryptographically. Each time a transaction occurs or more data is added to the database, the blockchain becomes more more secure, additionally, because information is added to the blockchain and nothing is deleted, it is possible to have an audit trail of every transaction that has happened. Thus mistakes and illegal transactions can be traced to their sources.
Compared with a centrally stored database, the computing power required to hack a blockchain is far greater. Because all users have copies of the same constantly-updating blockchain, a hacker would have to hack every node simultaneously to succeed.
A further advantage of blockchains is that money can now be transferred almost instantly, without requiring wet signatures on physical paper. Because every transaction is added to the blockchain with a timestamp creating verifiable audit-trails, the apparatus banks once needed to verify transfers is now obsolete.
Read the full article in the Financial Times here, behind a paywall.