Blockchains in Banks

Blockchains in Banks

What can blockchains do for Banks? by WikiCrypto

Blockchains are now gaining publicity a whole lot more – there’s like 6 TED talks about it already – but are blockchains relevant? Since the mainstream media has been running out of ideas about why Bitcoin is a bubble, people have been realizing the importance of the technology behind it. The first and foremost direct application of blockchains is in the banking sector. The blockchain technology can help solve many critical issues that exist within banking today and make banking easier and better for everybody in the world.

Faster  International Funds Transfers

Ripple is one of the companies that are now working to revolutionize the banking sector. Ripple is a real-time gross settlement system, currency exchange and a currency called a Ripple (XRP). Ripple boasts “secure, instant and nearly free global financial transactions of any size with no chargebacks”. Currently, Ripple is the third largest cryptocurrency by market cap, after Ethereum and Bitcoin.

The feature that makes Ripple stand out is the RTGS system, which is now being used by several major banks in the world as an alternative remittance system. Ripple has been identified by large banks which predict that the blockchains it uses is much more beneficial for the banking system as compared to Bitcoin. Therefore, you might soon see blockchains in banks.

Ripple is a solution for banks to avoid intermediaries. Currently, all banks have to go through intermediaries to send funds. Along with the costs, these intermediaries can take a lot of time to process your funds’ transfer. What’s worse is that there’s usually not just one intermediary. Put all this processing time together and you can have serious delays to complete an international funds transfer.

The increased time that conventional banks take can also create issues in the real world. Imagine you want to send your kids money when they’re abroad, you need that money to be sent immediately.

However, with traditional banks, this time can be dramatically well over 5 days. Ripple provides a solution that allows banks to complete funds transfer in minutes. That’s how fast Ripple’s block chain works. Since the blockchain eliminates intermediaries, it also eliminates the time taken by them to process your payment.

Transparency

Here’s where the idea of a cryptocurrency comes in. Today, conventional banks do not reveal a lot of information in terms of how they operate. Sometimes, you just need to trust your bank that the funds have been transferred.

This is unfortunate for the consumer since it’s his money and he can’t see where it is at this moment. If there were blockchains in banks, you can access all records to make sure that your money is safe. Since it’s run on a blockchain, the consumer can also verify all the transactions that he completed. In blockchains, there’s always certainty and full transparency because you can access all of the previous blocks.

Blockchains in banks Reduced Costs

Due to the innovative P2P network, blockchains in banks can help reduce costs to banks and eventually consumers. At this point in time, banks that use the old system to transfer money and consequently have to pay intermediaries.

The transfer isn’t possible without these intermediaries. Thus, they charge comparatively high fees to the banks, who transfer these costs to the consumer. This puts the consumer at a disadvantage because he’s paying for the transfer as well as the costs associated with the transfer. However, with blockchains in banks, there are no intermediaries.

Therefore, the consumer saves all of the costs associated with banking intermediaries since it’s a P2P network. This eliminates the disadvantage that was present before and makes international funds transfer more affordable.

Eliminates Fraud and Theft

A blockchain is a public ledger. It’s like you could open up a book and check exactly how much money you sent to someone. The past information that blockchains in banks bring is one of the best features. Since a blockchain is essentially a chain of blocks, a block being a group of transactions, you can go back and monitor what you did.

Unfortunately, you can’t change the past, because the block has been solved and attached cryptographically to the next. It’s practically impossible to go back and change transactions. Thus, if there are more blockchains in banks, there will be a degree of safety attached to the shift.

Since every transaction is recorded and can’t be changed, fraud and theft can be very easily monitored. That makes for a safer banking environment where people have full transparency.

Ledger Keeping

One of the great things about blockchains is that it is a perfect record keeper. The ledgers that are maintained on blockchains are reliable and cannot be tampered with. Thus, the people who hold their accounts at a bank that uses blockchains to keep ledgers can be confident that their accounts are safe.

The customers can be sure that the bank hasn’t been tampering with accounts since it’s practically impossible. Thus, the customers have a higher degree of trust that they can entrust into a commercial bank. Nowadays you might hear about banking conspiracies, but blockchains in banks can eliminate them!

Another great aspect is that the banking employees do not have to verify accounts individually when there is an issue that arises. Since all of the transactions on the blockchain are verified through the mining process, the bank can save a lot of resources thus cutting their human resource needs.

Smart Contracts

Smart contracts are essentially electronic contracts that take place and are registered on a blockchain. The potential in smart contracts is boundless. Imagine you could create a smart contract for someone willing to exchange currency with you online. If you wish to buy a token or bitcoin, you could use smart contracts to make sure that the exchange is done.

Usually, in this situation, an escrow service would be used. However, it’s another hassle to deal with escrow services when there’s an issue with an exchange. Smart Contracts eliminate the need for a third party. The smart contracts are electronically programmed to take place, thus they’re secure and can’t be tampered with. So, you can be 100% sure that you can exchange currency or bitcoins online.

If there were blockchains in banks, you’d be able to use smart contracts to concretize monthly pays and salaries. This brings a degree of trust to employees and owners of businesses.

What’s best about smart contracts though is that they need no human interaction to draw up. Usually, a contract can require legal assistance, which is expensive and time-consuming. Using smart contracts can essentially eliminate the cost and time needed to draw up a real life contract.

And that’s not all.

There are many ways how blockchains will affect business, finance, healthcare and even the way we use the money. This list isn’t even close to those of uses that blockchains have in other industries. Hopefully, you’ll start to see the effects that blockchains in banks will have soon. These changes have the power to revolutionize banking and remove the doubts that people have with banks today.

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About Article Author

Martina Kelowsky
Martina Kelowsky

Currently working on her Master Degree in Economics & Computer Science she lives in Russia. She is a Bitcoin Enthusiast since 2013 and Investor in various ICO since 2014. She aims to democratize a future where money is decentralized and transaction anonymous.

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