In the recent technological advancements, blockchain (Distributed Ledger Technology) has been coined the third version of the Internet. Coming from email, then going to websites and social media, to now the peer to peer maestro, the blockchain.
The blockchain DLT introduces a shared ledger system with every user having a copy of all the transactions. One advantage of this method is that the records cannot be changed since it eliminates the need for a central management party.
Initially, the blockchain pioneers first made a system which gave multiple users access to the transactions. This distributed ledger system became mainstream in 2009, powering numerous cryptocurrency applications such as the bitcoin.
This new DLT system eliminates the need for a third party or an intermediary, streamlining the entire transaction in which banks, credit card companies and PayPal have always assumed the positioned of the ‘trusted' third party mediator. Now, the scales are turning.
DLT in the Banks & FinTech Industry
Blockchain D.L.T. can be used to create a secure platform for transacting without anyone else required accept the payer and receiver. DLT saves people the money involved in a transaction as well as in service delivery. DLT decentralizes the way money moves. With bitcoin technology, transactions are be peer to peer going from one wallet address to another.
And now, banks and financial technology companies can get a good insight into the technology of money transfer and how to adopt to the “Internet Of Money”.
Benefits Of Blockchain Technology
Here's some commonly associated benefits of blockchain technology:
Users get to control all their information and transactions. With communal ledger service, every person carries a personal ledger book
Users can trust that dealings happen precisely as the protocol commands. One benefit of bitcoins involves the elimination of the need for a trusted third party.
Blockchain data is complete, timely, precise, consistent, and widely available. Cryptocurrencies are publicly acceptable over the globe.
Durability, Reliability, and Longevity
Bitcoin transfer uses decentralized networks. In case of an attack, conventional finance systems can quickly become paralyzed. Blockchain does not have a central point of failure and is better able to withstand malicious attacks.
Disintermediation & Trustless Exchange
Bitcoin transfers can occur peer to peer. As a result, two parties can be able to make a trade without the oversight of a third party. Eliminating an intermediary reduces or even eliminates counterparty risk.
The fintech industry is offering numerous positive trends regarding the operation of bitcoin currency. We also see the likes of CME Group and Man Group adding them to their exchanges. Many businesses employ the use of the E-auction System as a way to decentralize their transaction.
One of the most crucial aspects of this transaction is usually the part involving people trusting the common ledger system. This new approach minimizes the instances where the people corrupt the systems. There are also many advantages of using cryptocurrencies like bitcoin.
These new systems require the law enforcement officers to learn the protocols regarding the way bitcoins work. Bitcoin applies to many industries. Their use has a worldwide application and is gaining entry to the local market as a medium of exchange. Many people benefit from the use of a peer to peer transaction model. Cybercrime is also on the rise following the facilitation of smooth bitcoin operation and will be the next frontier people need to follow up on if they truly want to “be their own banks”.
Challenges of Using Bitcoin Virtual Currency
While cryptocurrencies come in with numerous advantages, they still possess some inherent cons. The nature of using cryptocurrencies comes in with some issues regarding their operation.
Some of these problems include:
While the pioneers of blockchain promise 100% security with bitcoin, it is possible to correct numerous security threats around its operation. There has been involvement of bitcoin in many cyber-crimes. The rise of internet fraud has its roots in the possibility of a peer-to-peer transaction.
Precisely, blockchain cuts down costs such as time and service fee. However, there needs high capital investment to get bitcoins. Moreover, a successful bitcoin business requires high capital investment for its operation. Most startups do not meet the capital investment policies to achieve them.
In most cases, there is need of a reliable support system for users to gain trust in the order. Moreover, people use bitcoins as a way to collaborate with the Fintech industry to allow the operations smoothly.
With the rise of internet fraud, malicious attacks involve individuals who tend demanding ransoms in the form of bitcoin. For instance, people who perform DDoS attacks ask for money inform of bitcoins to get their systems running.
However, bitcoin transactions still happen safely. In most cases, people use bitcoins to make borderless operations as well as other uses. Despite these challenges, the system follows a strict protocol which is impossible to break.
Future Trends Regarding Bitcoin
There are many ways to which the blockchain technology is shaping up the future of online transactions. Amazingly, many banking institutions do not foresee the bitcoin future affecting the fintech market anytime soon. There are many adjustments which are being carried out to make the platform safe and secure. Moreover, eCommerce businesses can be able to compete with other systems such as the PSD2, Faster Payment Task Force, and so on.
In future, most transactions in the Fintech industry occur through cryptocurrencies like bitcoin. From 2017, the bitcoin business can happen like a boom. However, there are several procedures which need some keen attention to make this process work well. For instance, banks carrying out blockchain transfers need to balance factors like:
Most banks and financial institutions streamline their blockchain efforts on projects that will be benefiting their businesses. This trend is likely to be a more efficient strategy than a broader, catch-all approach. Moreover, the more the bitcoins people mines, the harder it gets for people to get their bitcoins in order.
Cooperation with regulators:
The blockchain-based transactions may still use the current standards and techniques of banks about regulatory compliance. But financial organizations might face a hard time when trying to convince lawmakers how these new strategies work to gain their approval.
Fewer participants per project:
Most of the blockchain system users in the Fintech industry try to streamline their effects. Moreover, these people need to use few participants to make their targeting narrow.
In conclusion, blockchain transfers are expected to advance. Most e-commerce businesses in the fintech categories are seeking to streamline their cryptocurrencies transactions. Some banking institutions are still likely to remain skeptical about the bitcoin transfers industry.
Significant developments regarding the challenges of bitcoins are expected to take a long time. Moreover, businesses need to make their lawmakers understand the way blockchain transactions work. They need to control their mode of operation as well as laws governing the bitcoin transfers.
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