The technological development of computer systems continues every day. However, the financial system does not use all new technological advances and new technologies. Blockchain services can be compared to the internet revolution. The largest financial institutions in the world are already using the basic capabilities of the blockchain, but the scope of its use is limited. After a wave of enthusiastic early reviews of the distributed ledger network, theorists and practitioners realized that there are many limitations to new solutions and difficulties in implementing blockchain into the existing vast infrastructure of the financial system.
The basis of distributed registers is a departure from centralized information management towards its encryption for each participant in the system, which is associated with counteracting interference in the computing operations of individual blocks of stored data.
The financial system is a system of interconnected financial institutions, financial markets and other elements of the financial system infrastructure. Thanks to these connections, capital flows in the economy, there is a continuous movement of money between participants in financial markets and control over cash flows is established. In the financial system, it is important to provide for ways to transfer funds on time, ways to accumulate funds, use a convenient technological infrastructure and provide information on prices.
Use of blockchain technology – Kiev, Odessa, Vinnitsa
Blockchain technology allows money to be transferred between clients without the need for a bank account at virtually no cost, eliminating a third party. Blockchain is a distributed database without a central block. Each member of the network takes part in an encrypted but public transaction. Each new block is added to the previous ones, hence the difficulty of falsifying – without authentication – by participants who are already in a cryptographic sequence. Each blockchain also has a visible transaction history that cannot be changed or deleted. Blockchain is decentralized and distributed. The idea of decentralizing the database can make a huge difference to the financial system.
Each element of the financial system is associated with a central accounting unit. In the case of individuals, this is the banking system, while financial institutions also settle their transactions through organizations called clearing companies. This organizational structure from year to year gathers more and more financial and accounting centers of international financial institutions. Each center has dozens of departments that deal with one element of the clearing chain that ultimately leads to the verification of transactions. Blockchain allows you to replace all types of transactions, that is, transactions with securities, trade in receivables, funds and contracts.
In addition to the aforementioned applications of blockchain technology in finance, you can find many other possibilities of using its applications in everyday life, for example:
- documents available to the public: certificate of ownership of land and real estate, certificates of vehicle registration,
- driver’s license, identity card, passports,
- private documents: contracts, signatures, wills, powers of attorney, insurance
- policies, notarization of documents.
Over the past two decades, financial institutions in Ukraine and Eastern Europe have changed, primarily through Internet-based solutions. Settlements were accelerated, communication with clients was carried out through the Internet platforms built for this. However, all activities were related to clearing and inspection organizations. The Internet revolution is called FinTech 1.0, and the blockchain could be the FinTech 2.0 revolution. Comparing FinTech 2.0 with the previous version, we first of all notice an increase in the efficiency of the system, decentralization of settlements, a decrease in verification costs, an increase in the security of transactions and the absence of intermediaries. In distributed ledgers of the blockchain, securities related transactions can be settled in a few minutes, whereas in the existing infrastructure they take place only after 2 days.
Over the next few years, we must use the blockchain solutions and services of iTizzi (Dnipro, Lviv), because they will be thoroughly checked, useful and safe, and the financial system will only benefit from them.
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