Blockchain is one of the major reasons why the cryptocurrency industry has had such great success. This success has captured the interest of the global financial sector. It is only a matter of time before we see blockchain being used by the financial sector to do transactions.
The global financial system records transactions worth trillions of dollars in a single day. To further enhance the security of these transactions, experiments with blockchain have already been done to see how the decentralized ledger will work.
Transactions carried out through blockchain technology cannot be tampered with. At the same time, millions of transactions can be simultaneously carried out on a blockchain network. Execution and recording of transactions are automated, meaning that processing costs can be reduced significantly. Below are the fundamental principles of blockchain that have made it a successful network.
How Will Blockchain Revolutionize the Global Financial System:
Once a transaction is carried out through Blockchain, the details are simultaneously updated on all of the nodes within a block. This makes verifying transactions easy as users within the network gain access to that transaction information. Blockchain technology can update transaction records without any human interference. Nakitcoins.com is one of the sites that use blockchain technology for its cryptocurrency transactions.
Consensus validation by blockchain
No transaction can be added to a blockchain without going through a validation process. Remember that blockchain is not regulated by any central authority, and for the users to have confidence in the network, the transactions have to be validated.
Transactions are verified and then added to the blockchain network. Once they have been added to the network, they cannot be tampered with or even reversed. This means that it is not possible to interfere with transactions once they have been recorded in the network.
Blockchain Uses Smart contracts
For a transaction to be complete, there are conditions and regulatory rules that have to be met. Smart contracts are digital contracts whose terms have to be met before a transaction is approved. Blockchain uses these contacts to trigger transactions once all of the conditions stated in the contract have been met.
The global financial system, on the other hand, has been plagued by inefficiencies, which has led to people losing a lot of money or delays in transactions. These inefficiencies can only be solved using blockchain and its fundamental principles. Below is how Blockchain can solve issues affecting the financial sector:
Faster settlements on the stock exchange market
The stock exchange market keeps on growing yearly with the value of stocks traded worldwide per year rising to a whopping $77.5 trillion. As the market keeps on getting bigger, so is the complexity of transactions. One of the major issues affecting the global financial sector is the amount of time taken before transactions are approved as well as operational costs. With blockchain, this will no longer be an issue as transactions can be approved as soon as conditions are met.
The global financial system is a heavily-monitored sector. This is perhaps what has slowed the adoption of blockchain in this sector. Blockchain can only be adopted if regulatory authorities pass regulations that allow the use of blockchain to carry out transactions. Fortunately, regulations are now being passed to allow the use of blockchain in the financial sector. For instance, the US state of Delaware passed a bill that allows stock trading through blockchain technology.