Written by Crypto Guru
Blockchain technology is carving out a niche space in the world of finance and Ripple, in particular, has been moving into this space at a rapid pace.
Trillions of dollars are moved across the global financial system every day and impacts several billion people. But, the existing system has several weaknesses adding to delays as well cost in terms of fees paving way to friction through onerous and redundant paperwork, apart from creating opportunities for crime and fraud.Every year, nearly half of the financial intermediaries like stock exchanges, payment networks and money transfer services are hit by economic crime and that translates to 37% of the global economy while it is 27% and 20% for the technology and professional services sectors. The regulatory cost keeps climbing and has been a significant concern for bankers. Thus, the systemic inefficiency is also adding to the cost which is finally transferred to the consumers.
MichaelWuensch / Pixabay
The question that arises therefore is what contributes to the inefficiency of the global financial system. In the first place, the system is significantly antiquated and rides on assortment of paper based process and industrial technologies with a digital wrapper. Secondly, the system is centralized making it change resistant and vulnerable to attacks and systemic failures. Another reason for the inefficiency of the current system is its exclusionary character that denies several billion people access to the basic tools employed by the financial industry. Bankers have, to a large extent, dodged the kind of creative destruction that is essential for economic progress and vitality. But, this innovation logjam is slated to end soon and it is blockchain technology that is set to change the financial world for the better.
Originally blockchain technology was developed as a tool to run cryptocurrencies such as Bitcoin. Blockchain technology represents a vast distributed ledger among millions of computers across the globe. Blockchain technology can record anything that has a value, equities, money, titles, contracts, deeds, bonds, and virtually every other type of asset that can be securely stored and moved privately, and on peer to peer basis. Trust is a key factor in blockchain technology and intermediaries such as governments or banks do not play a role in establishing trust. Blockchain technology relies on cryptography, clever code, consensus, and collaboration. For the first time in the history of the universe, two or more entities, be they individuals or businesses who may be absolute strangers to each other can get into an agreement, enter into transactions and create value without the involvement of intermediaries like rating agencies, banks, and government to verify identities, establish trust, or carry out critical business logic such as clearing, settling, contracting, and record-keeping that form the basics of every commercial transaction.