Blockchain Application

The blockchain is a type of distributed ledger technology used for keeping a tamper-proof and permanent record of transactional data. This form of the distributed ledger is incorruptible and can be programmed not only to maintain a record of transactional data but also maintain records of virtually everything of value (Crosby et al, 2016). It operates as a decentralized database which is governed by different computers belonging to the P2P network (Crosby et al, 2016). The different computers in the peer-to-peer network keep a copy of the ledger to counter any single point of failure (Crosby et al, 2016). The maintained copies of the ledger in the computers in the distributed network are simultaneously validated and updated.

            The blockchain is comprised of blocks that contain digital pieces of information. The blocks have three key parts which perform different functions. One of the parts keeps a record of transactional information whereas the other stores information of the individuals participating in the transactions (Crosby et al, 2016). The third part is responsible for keeping information that helps in differentiating the blocks. Blockchain has no transaction cost. However, it has an infrastructure cost. Blockchain which is merely an immutable ledger helps in ledger manipulation without the intervention of a third party (Crosby et al, 2016). With the emergence of Bitcoin as well as other types of cryptocurrencies, Blockchain has found wide application as it is the technology that powers digital currencies (Crosby et al, 2016). However, it is not tied to digital currencies has it is widely used in the finance and banking sector.

            Some of the uses of Blockchain in the banking and finance sector include making international payments. Considering that Blockchain offers an efficient and secure means of creating a temper proof of sensitive activity, it makes it suitable for facilitating international money transfer and payments (Andrew, 2017). Application of Blockchain in making international payments helps to relieve banks the cost of facilitating the international money transfer as it abolishes the need for banks to manually conduct transactions (Andrew, 2017). Additionally, Blockchain technology can be used in the capital market as well as corporate technology. This development might take longer since it is anticipated to be complex.

            The distributed ledger technology of Blockchain is also used in trade finance. For instance, Barclays conducted its pilot deal involving Blockchain trade finance in September 2016 by the use of a system developed in partnership with Israel fintech Wave (Andrew, 2017). The transaction was a success with highly notable achievements at the deal which was to take about a week was executed in four hours. Considering the Barclays experience, it is evident that the application of Blockchain in trade finance will revolutionize the sector as it will abolish the slow processes that make it difficult to manage liquidity and also interrupts business. Blockchain can be used in P2P transactions to resolve the shortcomings associated with the contemporary peer-to-peer transactions which include highly vulnerability to information security breaches and limitations is payment services in terms of amount and geographical location (Andrew, 2017). There is also a transactional fee charged but with the application of Blockchain it will be abolished as it does not have a transactional fee. The blockchain is also capable of counteracting the menace of money laundering due to its high-level encryption. Its recording keeping technology also supports “Know Your Customer” capabilities of identifying and verifying the client’s identity in a business (Andrew, 2017). The extreme security of Blockchain is also helpful in accounting and audit as it helps in minimizing cases of errors hence promoting records efficiency. The blockchain is also used in the insurance sector. In conclusion, application of Blockchain in the banking and finance sector has resulted in increased efficiency.