One of the main characteristics of Blockchain technology is the fact that it is decentralised, distributed, programmable and immutable. In other words, there is no owner of the Blockchain, all participants have a copy, it contains portions of code (Smart Contracts) and once something is written, it cannot be deleted nor modified. Its applications are becoming more and more widespread in different sectors, and we can find more use cases in the banking sector.
Blockchain for payment management
It is possible to use a public or private Blockchain to make financial transfers between different parties. This is particularly useful for facilitating international transfers. Blockchain will make it possible to tokenise an amount of money, identifying it and blocking the economic funds that are reflected in the blockchain so that transfers can be made between them. As all the movements are reflected, there is no doubt about who or how the transfer has been made and received. All the information will be stored in the database, which can be consulted at any time, making payments very reliable. In fact, each person or group has a private key, which makes it even more reliable.
Blockchain to facilitate banking negotiations
It is possible to transfer a business process between several participants within the Blockchain, through Smart Contracts to enable the programming of the entire negotiation flow. For example, to negotiate the signing of the contract, we can define the process, include modifications by all the participants, monitor the flow, define the terms to be negotiated, reflect changes in the terms through a new block in the chain, consult the agreements obtained, etc. In short, the entire process can be automated, and, through a web interface or application, the cycle can be monitored, and the agreements reached can be consulted.
The introduction of banking in the management of cryptoassets and decentralised finance
The trading of cryptoassets has gained a lot of momentum in the financial sector. Banks are gradually beginning to dare to offer their customers the possibility of buying and selling cryptoassets such as Bitcoin or Ethereum from their platforms. This type of asset is closely linked to the regulation of each country, and the European Union is actively working to establish specific regulations.
Decentralised finance (DeFi), like traditional finance, but with flows based on a Blockchain, is also gaining push. Thus, financial products such as a loan can be managed through smart contracts, providing security for both lender and borrower. Processes are automated and external audits are increasingly frequent to verify that there are no flaws in the code and no funds will be lost due to possible errors.
These are three clear examples of how blockchain technology can transform the world of finance, although we could talk about other applications such as tokenisation, which is closely related to the management of payments. In any case, as the technology develops, new and increasingly consolidated applications of blockchain for the banking sector are being found.