How Blockchain is Revolutionizing Fintech
Finance, like many other tech-oriented industries, is rapidly evolving. There are new finance apps that are seemingly popping up on a daily basis, offering bold new approaches to the management and processing of payments. While this industry has seen enormous growth, the advent of blockchain technology threatens to bring about an unprecedented era of disruption and bold innovation to finance technology.
Although synonymous with cryptocurrencies like Ethereum or Bitcoin, blockchain’s use cases are continually expanding into new areas of finance, social media, supply chain and much more.
As of early 2022, the total volume locked (TVL) in decentralized finance is just North of $200B. The vast majority of that volume includes institutional early adopters such as crypto hedge funds, banks and centralized exchanges like Coinbase or Binance.
Over the course of the next decade, we will see decentralized finance leverage blockchain technologies to fundamentally change the way we send, receive, manage and save our money. Let’s dive into how and why this innovation is the future of finance.
Blockchain Technology
Blockchain basically exists as an immutable ledger that stores data in blocks. With this technology, it’s possible to develop an entire ecosystem of fintech apps that are faster, cheaper and more secure. Not to mention, the blockchain is fully transparent, meaning every transaction is public and traceable. This environment of enhanced transparency is spurring a new level of accountability for major corporations which will only serve to benefit the average consumer.
When utilized correctly, the blockchain maintains the ability to enable financial transactions with no middlemen present. Thus, establishing a peer-to-peer network that is capable of super secure, lightning-fast transactions
However, blockchain’s application within finance spans far beyond mere transactions. The underlying distributed ledger technologies (DLT) will allow individuals to take complete control of their financial future.
Trustless Financial Ecosystem
Blockchain is enabling individuals to manage their wealth without a bank in sight.
Those who hold cryptocurrencies can choose to do so with the use of crypto wallets. These wallet holders are protected by private keys which are the only mechanism that grants access to your assets. Crypto wallets also possess their very own unique public address to allow them to send and receive payments from others.
Unlike a bank account, absolutely no one can access your wallet unless you accidentally gave away your private keys. Essentially, you are the sole owner and manager of your digital assets.
With the total number of blockchain wallet holders rocketing past 80 million in 2022, we can clearly see that blockchain’s influence in revolutionizing finance is already underway.
Revolutionizing Verification
Currently, verification is performed through various intermediaries. Blockchain has the power to completely eliminate the trust element that’s central to our current financial sector.
Know-your-customer or KYC will take place as a singular digital entry that is cryptographically secured. The entry will then be distributed across the network as a means of eliminating multiple entries and verification. These improvements in the field of security will directly improve sectors such as supply chain, banking, education, healthcare and many more.
Borderless Transactions
Another game-changing feature of blockchain is that it supports borderless transactions through cryptocurrency utilizing native protocol framework. This technology can also offer a faster, more straightforward payment system due to reduced costs to make transfers between accounts. Because blockchain transfers are permissionless, they don’t need authorization via a middleman. This means banks will no longer have to use resources to transfer funds and charge payment processing fees for international payments.
Blockchain also offers a better flow of currency worldwide. Typically banks would charge about 15% to 20% of the amount transferred as a remittance fee. However, with blockchain, this figure can fall below 1%.
As we’ve already noted, blockchain transactions are also extremely secure since all the participants in the network need to provide their approval for the transaction to be validated. In addition, anybody can use tools such as Etherscan to check the updated ledger for the details surrounding the payment.
Conclusion
Fintech has become an influential force in the modernization of traditional finance. As a result, the past 20 years have seen us transition faster and faster towards a cashless society. We have also gained more exposure to investment opportunities that were previously granted to only the more affluent class. However, the emergence of blockchain technology will bolster the development of fintech unlike the world has ever seen. This technology will create a world where individuals can effectively manage their wealth without the need of intermediaries or institutions of any kind. Blockchain will usher in a new era of responsibility, accountability and transparency in finance.
