Top 5 blockchain applications in central banks
Blockchain is a decentralized database, shared across a distributed network of computers that are in the public domain. It is a list of blocks, or we can say records which are often related to cryptography and cryptocurrencies. Blockchain applications in various financial sectors like banking, financial institutions, stock exchange etc. have garnered much praise. With an initial purpose of a mechanism behind cryptocurrencies, today the blockchain technology has stepped far beyond just powering the bitcoin transactions.
Many of the banks are trying out blockchain as they can use it for money transfers, record keeping and other back-end functions. Here is a list of top 5 applications of blockchain in the central banking industry.
1. Fraud Reduction
Blockchain has earned the reputation of a fast-emerging technology that would reduce fraud in the financial world. Fraudulent cases make up about 45% of defunct activities in the banking sector. Most banking systems in the world, built on a centralized database, are more vulnerable to cyberattack because once they come under the attack, hackers get full access. This technology would get rid of some of the current crimes committed online today against the financial institutions.
2. Verifying bank customers
Verifying the customers is necessary. According to a prominent blockchain magazine, central banks spend up to 600 million dollars to reduce money laundering and terrorist activities. They spend the money to make it mandatory for businesses to verify and identify their customers. Blockchain can play a significant role in this by making the verification process much easier. It will also bring down the costs of identification and make the system more robust.
3. Secure Payments
Blockchain could be highly beneficial in the secure payment process. It can provide central banks with higher security at minimal expense to process payment between organizations and their clients and also between banks themselves. Blockchain is the best technology that would get rid of all the distractions in the payment processing system.
4. Trading System
The very first use of blockchain in the trading system was seen in May of 2015 when Nasdaq launched Linq, a blockchain private trading platform that would allow private companies to represent their share ownership digitally. The trading system is one of the most popular blockchain applications.
5. Smart Contracts
Blockchain technology provides a smart way for smart contracts as blockchain facilitates all kinds of data storage that require a digital representation. One can create smart contracts when the blockchain code is programmed and automatically executed based on the conditions of the program.
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Blockchain technology can open new ways for the banking system by making it more suitable for faster and inexpensive transactions. It will avoid fraud transaction as transactions will not be in the knowledge of one person, but the whole organization will have information about it. Blockchain applications make the system more secure and transparent. Not only banks but many business organizations are also looking for ways to integrate blockchain into their operations. However, not many know what blockchain is all about. Therefore, people need to be made aware of the advantages of this extraordinary technology.