Most financial applications use the banking system as a point in the process. But blockchain technology is more disruptive in that it aims to cut out intermediaries. That’s why today we’ll take a look at where blockchain is at and what new developments it has brought in fintech.
According to the latest graph of the cycle of emerging technologies we can see that blockchain technology can be found at the limit of the peak of inflated expectations and in the abyss of disillusionment. But we can also find Blockchain data security in the launch phase, as we can see in the following graph:
While the most popular use of blockchain technology is in the payment clearing process through elimination of commercial and central banks, with potential in the stock market, smart contracts (smart contracts), remittances, medical services, audits, electoral processes.
Why Fintech with Blockchain?
Blockchain is an emerging technology that can radically improve banking and other transaction networks, giving them new opportunities for innovation and growth while reducing costs and risk.
Blockchain technology offers market participants a way to directly access dematerialized assets without having to go through other participants unnecessarily. In the centralized repository (the system currently in use) most participants are disconnected from their asset pools, the settlement transaction requires participants to collaborate in a slow, inefficient and costly flow. Centralized repository slow, inefficient and costly system.
Therefore, a shared repository is going to offer all participants that can interact with the depositary directly without involving third parties, which makes post-trade operations cheaper and faster.
The different applications that we can find within the financial sector that are best suited to blockchain technology are:Financial instruments: cross-border payments, private equity, derivatives, trade repositories, expense records, mortgage and loan records, and microfinance. Processes: clearing networks, international transfers, clearing and settlement, audits, reconciliations, reporting, settlements, and asset ownership.
Blockchain for the financial market
Trading, clearing and settlement functions can be automated on a blockchain network using smart contracts and oracles. Smart Contracts thanks to the BlockChain network. The market we find exchange applications where they can live on the blockchain or off the blockchain. That is, off-blockchain applications are often more centralized, but are likely to offer better performance.
Final clearing / settlement of financial assets can be automated through smart contracts, which have direct access to the assets defined on the blockchain. And finally, oracles are services outside the blockchain that integrate on-chain contracts with existing systems; network participants do not interact with oracles directly.
We can find multiple fintechs already in the market working in different sectors such as smartphone or digital payments, capital markets, corporate banking, analytics and big data, cryptocurrencies and bitcoins, financial platforms, crowdfunding and crowdlending, personal finance management and blockchain technology.
Fintech in today’s market
But the adoption of blockchain technology in the financial market began in October 2013. From here, collaborative strategies were formed by traditional entities that have forged alliances and created laboratories, hubs and accelerators to promote innovation, adopt emerging technologies and participate in the fintech ecosystem, through the fintech banking synergy that allows prioritizing the strengths and experience of each sector, where banking allows scaling fintech models through infrastructure, capital and customers and fintech is the innovation and disruption that helps banking to offer more value and services.
- The first fintech project I would like to highlight would be ‘2gether’, a collaborative financial platform, which works with a card where it performs the exchange of cryptocurrencies to market circulation money (euros/US dollars) to make payments through conventional card payment terminals.
- Another payment fintech that we can find is ‘Marketpay’, a smart payment platform for digital businesses, in which you can make payments for custody, vote counting, crowdfunding campaign payments, payments in Internet of Things (IoT) solutions, payments in second-hand sales and smart payment platform.
Finally, wallets are software designed to store, send and receive cryptocurrencies. In wallets we can make transactions with digital or virtual currencies and can be comparable to a bank account. As an example we can name ‘Coinbase’.
Example of Blockchain in capital markets
The company that wants to highlight within this point is from ‘Symbiont’ where it develops products in smart contracts and distributed ledgers for use in capital markets.
It provides an interface for specifying terms and conditions when issuing smart securities, as well as integration with market data sources. Smart securities are self-executing smart contracts. Self-execution reduces the time and cost of administering and transacting with traditional systems.
Examples of Blockchain in legaltech
The first project I want to highlight is ‘Finboot Tech’ which is a digital platform for signing smart contracts for corporate use. The current applications they are working on:
- Black labs: certifies quality of petroleum products and tracking their production as they exchange hands between different actors in the supply chain.
- SALMA: uses blockchain for data protection, giving the user back control of their data and helps companies adapt to new regulations.
On the other hand, we can find the company ‘Chainalysis’ that allows to track transactions on blockchains and helps to identify and stop those people who misuse cryptocurrencies, i.e. with illicit activities, fraud, extortion and money laundering. These are the latest developments that brings us the financial market with the union of technology, if you liked it and want to know more about Fintech and BlockChain we encourage you to watch the Webinar where you will learn everything you need to get started in the subject.
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