The blockchain is a new reality that promises to change forever the way the financial and digital system is managed. This technology allows the transfer of data and capital in a completely secure way thanks to sophisticated coding and encryption. Aware of the change that this disruption can have on the financial world, Kimberly Rosales, cryptography expert, explains how blockchain gives an innovative aspect to the financial ecosystem.
You may have heard this term and still not know what it means, nor the impact it could have on your life. As happened with the incursion of the Internet, blockchain could change the way many relate to the digital world of banking.
This favors, among other aspects, transactions, security or management of the online entity. In addition, it allows a reduction of the bureaucracy required in financial operations and improves transparency.
“The blockchain is a technology that makes it possible to create networks of devices without the need for a central and localized server to connect them to each other,” explains Rosales. “You could say it works like a ledger, where buying, selling or any transaction is recorded.”
For these movements to be recorded, they must have been approved by the rest of the participants in the ‘block’ network, in other words, the users of this technology. And, once the information is entered into them, it can no longer be deleted. Only new records can be added.
One of the advantages of this tool is that it offers the possibility of carrying out economic transactions quickly and securely against possible fraud and manipulation, since it uses encryption and encoding. This allows companies to offer a more global payment alternative to customers, without jeopardizing the security of both parties.
Another great benefit it offers is the possibility of implementing a totally transparent business system in which everyone can see the status of the accounts registered in “this big book,” or more simply, what comes in and what goes out in real time and at a low cost. But the blockchain does not only work for economic transactions.
“With this technology, important company documents and information can be stored and transferred without the possibility of anyone being able to access it without your consent,” asserts Rosales. “And what is more important: without the danger of it being modified. To guarantee the security and transparency of the vote, many companies use this technology for voting at their General Shareholders’ Meeting.”
Transactions are stored in a tamper-proof public repository registry organized in chronological blocks of strings. The tokens will represent trading assets so that all participating users or traders have access to the public blockchain. Consequently, blockchain technology enables autonomous project execution, immutable records and transparency of trading rules while enabling superior automation potential.
Blockchain has significant implications for future financial transactions. Information silos and excessive waiting times are gone. Transactions are cheaper and more efficient. Transaction risks are reduced because asset provenance, credit history, and other immutable elements of the record are inextricable. Lines of sight also lengthen.
“Trading is assured as it will be easier to verify and authenticate that each trading partner is complying with their respective end of an agreement. Since audit trails are cryptographically stored and readily available, complex dispute processes become simpler. Smart contracts carry out binding agreements and negotiate in real time. DLT makes compliance possible and easier,” Rosales states.
Therefore, financial institutions, regulators and key stakeholders in different industries are comfortable with the emerging infrastructure. Regulators, with distributed ledger technology, can access the shared trading and depository, and assist with the data they exchange and need.