Here's How Blockchain Will Change the Financial Services Industry

Here is why the blockchain is the biggest thing since the gold standard and has the ability to revolutionize the entire financial system.

The blockchain is the underlying technology behind bitcoin, the popular cryptocurrency that is revolutionizing the way we conduct transactions. The blockchain is, essentially, a vast, distributed ledger capable of recording anything of value. It can record deeds, rental agreements, equities, contracts, money, titles and, realistically, any kind of asset. These records can be stored and moved privately between two parties independent of any financial intermediary. It is essentially a peer-to-peer transaction tool that does not rely on an intermediary for verification or identification of the involved parties.

The blockchain is open source, which means that anyone can change its underlying code. The technology relies on state-of-the-art cryptography to record and authenticate transactions. The blockchain is also decentralized as there is no single repository where the information is stored. If one party to a blockchain attempts to modify the ledger, other parties are immediately notified so appropriate action can be taken.
The effect on banks

If financial intermediaries are not required for transactions, banks are the supposedly biggest losers in this equation. However, banks are not sitting on their laurels when their core business model is being altered. Banks and other financial institutions such as JP Morgan, UBS, Fubon Financial, BNP Paribas and ING are coming together to build business versions of the underlying technology behind Ethereum, which is the second most popular cryptocurrency.

This alliance is focusing on the development of a private Ethereum blockchain, so it will be separate from the public Ethereum blockchain. Current financial services are relying on becoming intermediaries in the blockchain system as well in order to maintain their relevance. In the short term, the blockchain is poised to transform the financial services industry rather than render it irrelevant.
Funding and investment

Our present funding and investment models rely on intermediaries to conduct transactions at every stage of the process. Lawyers, investment bankers, and venture capitalists come with high attached costs, but the emergence of peer-to-peer lending schemes and equity crowdfunding schemes have derailed this market for over a decade. It allows entrepreneurs to meet with investors without going through a costly third party and the blockchain is capable of bettering these functions. It can automate most functions and ensure that the recording of investments is smooth, secure, and transparent. Smart contracts will ensure that this landscape is fundamentally altered.

The blockchain allows entrepreneurs to meet with investors without going through a costly third party, and it is capable of bettering these functions. It can automate most functions and ensure that the recording of investments is smooth, secure and transparent. Smart contracts will ensure that this landscape is fundamentally altered.
The blockchain will be as significant as the internet

The blockchain will ultimately make the world a more democratic place and bring banking services to hundreds of millions of individuals who have not had access previously. In the blockchain, the know-your-customer (KYC) aspect is performed as a singular digital entry that is secured cryptographically. It is simultaneously distributed across the ledger, and it eliminates any duplication and verification. Hence, an individual's identity is automatically verified. This is ideal for intercountry transactions and remittances.

The blockchain is capable of doing everything that a financial service can do without the insane costs involved. Yes, the blockchain is not perfect and still has security issues that need to be sorted out, but there is no technology that exists right now that is capable of influencing the world as much as the blockchain.

By Jonathan Furman