Most people hear the term blockchain and automatically think of cryptocurrencies, like Bitcoin. We are living in an age where cryptocurrencies actually increasing in their popularity each given day, an example of it is the increasing demand for crypto trading apps.
While this is still one of the most popular uses for blockchain technology, it’s still capable of much more. Let’s look at why and how this innovation is used in finance.
Blockchain is a unique type of data storage. All types of information, including account numbers and transactions, can be stored as an encrypted code. These codes connect to each other to form larger blocks of data, and then blocks are chained together.
The information is stored all over the world rather than in one place. Because data is encrypted and related to so many other moving parts, it’s almost impossible to hack it without raising a red flag.
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Stock market exchange
The stock market is constantly fluctuating, which provides narrow windows of opportunities for buyers and sellers. It can take more than a day to complete all the steps necessary to trade shares. This is due to the multiple steps needed in order to initiate, verify, and process transactions for each trade.
Blockchains simplify the entire ordeal. With shared data points, buyers and sellers can be matched almost immediately. The respective party’s trading history is available for a quick assessment, and transactions can be conducted securely.
Credit score reporting
Credit scores have an impact on all major life events, such as purchasing a home, taking out loans for school, and starting a business. Typical lending practices require lengthy credit score reviews, which are frequently costly and unsecured.
Individuals and businesses can instead store relevant financial information through blockchain. Smart contracts securely review your credit history and only return the relevant information. It’s cheaper for banks, and it doesn’t require you to hand over your all-sensitive data to one institution.
International transactions
International transactions have always been quite tricky. Transferring funds across borders has historically been expensive. It has also required verification from a third-party, which could delay payments by multiple days.
Blockchain app payments remove the third party entirely, since all the necessary information is securely stored and accessible on multiple services. It’s also less costly, with fees as low as one-tenth the price of using Western Union or similar services.
Digital identity verification
There are countless points at which users have to verify their identity when banking or handling other transactions online. This involves a variety of different forms of verification. You may need to conduct a video call, prove your identity by answering very specific questions, or provide a third-party authorization.
These requests don’t just happen once – you must fulfill them every time you use such a service. Blockchain allows users to submit digital identity verification instead. This encrypted data can also be safely stored, meaning you only need to be verified once.
Just the beginning
These unique opportunities wouldn’t have been possible without blockchain technology, and they’re just the starting point. With increased flexibility, security, and speed, many financial institutions are looking to enhance their services with blockchain.
Staff writer
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