Blockchain has been a growing buzzword among tech circles in recent years. The technology has evolved from simply being the infrastructure for bitcoin into a full-fledged ecosystem that has shown tremendous potential. Until recently, blockchain was considered a nascent technology. After all, until just a few years ago the only real blockchain solution was Bitcoin.
Shortly thereafter, though, the rise of the Ethereum chain and with it several other ecosystems, including open source versions such as Graphene, led to the rapid adoption of blockchain. More and more industries are starting to see the real potential of a decentralized ledger system that offers both transparency and efficient information logging.
One industry that has shown cautious optimism and is now ready to dive into the blockchain game is banking. While blockchain first emerged as a purely financial system, it has been used in everything from logistics to the Internet of Things. However, nowhere is it more useful than in its capacity to log transactions. With it now being considered a bona fide technology, the financial industry is more eager than ever to fully explore the potential of blockchain, with several banks already having dipped their toes in the water.
Banking and blockchain seem like a match made in heaven. The industry has been accused in the past of being purposefully opaque thanks to outdated information systems and the remnants of the financial crisis of 2008. With the passing of new regulations that forced banks to digitize their records and become transparent, the blockchain ledger seems like a clear-cut way to open the industry to a more fraud-proof model.
Indeed, one of the biggest applications for blockchain technology is in the realm of fraud reduction. With almost 45% of financial intermediaries reporting economic crime yearly, and most banking systems built on a centralized database model, financial crime is a real threat. Blockchain’s transparent model and encrypted infrastructure could seriously curb the risk of intrusion.
More importantly, banks are starting to explore using blockchain in meaningful ways, such as financing trade. As early as June of this year, seven European banks joined with IBM to create a blockchain system aimed at providing trade financing for small and medium-sized businesses. By applying this model, banks could easily offer financing for road-based trade industries, including shippers and freight carriers, alongside credit agencies with smart contracts that automate many of the fraud-vulnerable processes.
Read the source article at informationweek.com.