Blockchain, the underlying technology of cryptocurrencies, has a great impact on the financial system. However, it acts as a double-edged sword for banks. In one way, it helps the banks to reduce transaction fees and become profitable. On the other hand, it is taking away the traditional banking systems, and investors are interested more in fintech startups than banks.
Overall, blockchain is changing the financial system, and everyone must know how the future will look like. Thus in this article, I will be sharing how blockchain is shaping the future of the financial system.
Role of Blockchain in Shaping Financial System
With a completely new concept, blockchain entered the world of finance in 2008. Initially, it got many rejections due to the complexity and anonymity of the owner. However, after the rise in the first digital currency (bitcoin), people built trust. You can find out Value of Cryptocurrency and about the bitcoin revolution and its potential for the future.
Gradually, people started moving towards the cryptocurrency and blockchain space. Moreover, blockchain is not just used in the financial sector. It has wide application in different sectors. But we will focus on how it will change the financial industry in the future.
1. There Will be No Central Authority
There will be no central authority in the blockchain system. Unlike the traditional banking system, it will not have a central body to approve and verify all the transactions. Inherently, blockchain is a decentralized distributed ledger where a network of computers will verify the transactions. So the complications of multiple ledgers will be eliminated, one public ledger will keep a record of all transactions.
2. No Intermediary Involvement
Secondly, there will be no intermediaries such as accountants, lawyers, or bankers who will settle the transaction processes. Every transaction will be done by the users who are involved in the transactions process. The technology will replace the need of those intermediaries. Although it’s not good news for traditional bankers, it can drastically improve the efficiency of the process.
3. Transactions Will be Faster
Transactions between different banks or international transactions may take up to some days. But the transactions in the blockchain network will take only a few minutes or hours, even for cross border transactions.
4. Processing Cost Will Decrease
The processing and operational cost of transactions will drastically reduce. As there will be no third-party intermediaries or middlemen, the cost of the transaction is very less.
5. Transactions Will be Secure and Transparent
As blockchain technology uses cryptographic encryption, the platform is very secure. And everyone can trace the changes made in the network. Again, the transactions cannot be altered or removed from the ledger. This makes the blockchain technology trustworthy and convenient for the users.
7. Global Investment Platform
The traditional investment platforms require intermediaries, bankers, financial institutions, etc. Moreover, you have to pay exchange fees for investing in the international market, and it’s not easier and convenient to invest in other investment assets. At the same time, blockchain technology allows you to invest in cryptocurrencies from crypto exchanges easily. You can invest in virtual currencies from any part of the world; the only condition is crypto investment must be legal in your country.
8. One Currency System for the World
Last but not least, many financial experts claim that cryptocurrencies will disrupt traditional currencies. However, nobody knows when it is going to happen, but the fact is cryptocurrencies have the potential to replace traditional currencies. If it happens, then cryptocurrencies will be treated as global currencies, and there won’t be any exchange barrier that exists in the present model.
Conclusion
I hope the information above helped you understand how blockchain technology will change the financial system’s future. Moreover, it also offers a great investment opportunity for investors; if you can take high-risks, then bitcoin and cryptocurrencies can be highly profitable. But you need to understand the risks involved and learn how to deal with them. Finally, please share your opinion and suggestions in the comment box.