Blockchain technology has seemingly swept through Africa and therest of the world to dominate headlines. The fintech industry is one area that has certainly seen some of the biggest changes and we’re going to look at these. Understanding the innovations that are happening around you could really help when it comes to making the most of current opportunities andplanning for the future.
What is Blockchain Technology?
A blockchain is a powerful digital ledger that functions as a distributed database. In other words, it is a database that isn’t stored in any single location but is rather hosted on millions of computers simultaneously. Originally used to record Bitcoin transactions, this technology has been purposed for a variety of uses and theadvantages are:
- As it is publicly available, a blockchain is easily verifiable.
- As no central version exists, a blockchain is difficult for hackers to corrupt.
- As it is hosted on the internet, a blockchain is accessible by all.
- As there is no single storage area, the likelihood of failure is low.
Storing Personal Data with the Blockchain
As can be seen from the points above, the blockchain is particularly well suited to storing sensitive personal information. In fact, the blockchain has the potential to improve security with data such as customer information stored on trading platforms. The trading and investment industry is highly regulated – with data protection being of paramount importance – and so thistechnology is certainly making a difference there. And, of course, blockchain technology is changing the actual assets that are being traded by investors, and we will look at thesenext.
Trading and Payments with the Blockchain
Perhaps the most prevalent use of blockchain technology has been in cryptocurrencies. And these have certainly made their mark on fintech. Bitcoin, Bitcoin Cash, Ripple, Dash and other currencies are both traded for profit and used for payment around the world.
Cryptocurrencies are also traded as derivatives, with the first Bitcoin futures market opening in December 2017. This form of trading allows traders to speculate on the rise or fall of the price of Bitcoin, and to use the power of leverage to maximise their profits.
Another area that cryptocurrenciesare making a difference to the fintech world is in the introduction of new hardware and software, in that currencies like Bitcoin require specialised wallets for secure storage. In fact, this has created an entirely new product category for fintech businesses to explore and benefit from.
Accounting with the Blockchain
Executives, managers and accountants in the fintech industry are understandably concerned about the accuracy and accessibility of their records – and this is an area where blockchain technology really comes into its own. Harnessing the power of the blockchain, a source of financial information can be created which multiple stakeholders can reference and amend. Any changes are completely transparent and traceable, making this an extremely secure method of handling accounting records. This represents another niche in which to provide fintech products, and blockchain accounting has already been identified as an opportunity for the accounting industry.
In fact, there are numerous opportunities for fintech companies when it comes to the blockchain. If you are interested in taking advantage of them, perhaps the best approach is tocontinually arm yourself with knowledge and to be unafraid of exploring new iterations of this exciting technology.