The blockchain is a global distributed ledger for storing data in a secure and private manner. The technology ensures integrity and trust between strangers, while eliminating powerful intermediaries like banks. The blockchain ties in with information technology through a manner of heightened security, global currency, and possibly less taxes.

        There are five key elements for understanding the underlying functions of the blockchain (Tapscott, 2017). Distributed Database is a fancy word for saying that each party on a blockchain has access to the entire database. No single entity can alter the data. Peer-to-Peer Transmission is where the communication occurs directly between peers, with no third party entity involved. As for, transparency with pseudonymity, the transactions and its value are visible to anyone with access to the system. Irreversibility of records for transactions in database cannot be changed, because the transaction is linked to previous transaction records beforehand making alterations impossible. Computational Logic allows users to be able to set up algorithms that trigger transactions between nodes.

        One of the most interesting items about blockchain is that an intermediary does not need to be involved.  Trust is already established through business logic. Heightened security is increased in the manner of blockchain due to the cryptography, collaboration, and brilliant complexity of the code (Nead, 2017). The technology behind cryptocurrencies like Bitcoin, is the blockchain. This technology is leading the frontier towards a global currency (Groenfeldt, 2017). Today, we have over 1300 cryptocurrencies, each one unique with a purpose (Schrodt, 2018). Nano, a popular cryptocurrency, allows individuals from anywhere in the world to easily do fee-less transactions within seconds. Nano, is just one of the many examples of cryptocurrencies that allow safe transactions between two parties.  Transactions do not rely on an intermediary and therefore fees will be lower or nonexistent as now.

        In a study done by Deloitte on the impact of implementing blockchain across nine sectors of financial service, they found that technology has the potential to “live-up to the hype” and reshape financial services but requires careful collaboration (World Economic Forum, 2016). The technology will drive simplicity and efficiency by establishing new financial service infrastructure. The next generation financial services will be in conjunction with other emerging technology. The new financial services infrastructure will transform business models, as well as involve deep collaboration between incumbents, innovators, and regulators.  Blockchain is opening up an entire new financial industry to companies and individuals, virtually at the push of a few buttons.

        Blockchain has many great benefits. Valuable driving forces include: operational simplification; regulatory efficiency improvement; counterparty risk reduction; clearing and settlement time reduction; liquidity and capital improvement; and fraud minimization. Blockchain enables real-time monitoring of financial activity. It reduces lock-in capital and provides transparency into assets. Blockchain enables asset provenance and full transaction history to be established within a single source of truth, allowing fraud to be minimized. Blockchain enables the real-time multi-party tracking and management of letters of credit, as well as, faster automated settlement.  Global payments are used and settlement time reduction enables the near real-time point-to-point transfer of funds between financial institutions.

        Banks are being centralized, people and companies have a strong reliance with  dependency on an intermediary. Blockchain will replace the the current centralized business model (Mehta, 2017) of the financial services industry, causing a significant allocation of time and money for the infrastructure replacement to turn towards a decentralized model. The shift to blockchain and network-based approaches will cause employment to drop with cutting out the middleman. The potential to disrupt the role of banks acting as gateways for transferring funds is very high as we approach this network-based approach.

        Blockchain is very interesting and intriguing in the finance world. Our financial systems are outdated and old-fashioned. Technology is revolutionizing and restructuring the entire ecosystem of finance. For decades, finance has been known to be a centralized force with power. With the new technology of blockchain, centralization is shifting towards a decentralized approach, eliminating old jobs, while also creating new opportunities that are yet to be explored in the realm of financial services, especially in the area of fintech (Bradford, 2017). The economy has shifted from paper money to digital money, like credit cards, to now cryptocurrency. The difference between a credit card transaction and cryptocurrency transaction, is that a credit card pulls payment from an individual’s account, passing through financial intermediaries (Blystone, 2015). Cryptocurrency, on the other hand, is pushed directly from one party to another, without an intermediary.

        The future of finance and investment banking is about to take on an entire new face with all new technology and all new currency.

Max Fritzhand

I have always loved to write and am a thoughtful writer. It's one of my many creative outlets - right next to cooking and gardening. I was involved in my school's journalism program, having been published in newspapers and scholarly journals

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