5 Ways Blockchain Could Impact Fintech Startups
Updated: Mar 3, 2019
Blockchain is revolutionising the way information is shared, stored and accessed in the age of the internet. It is a unique decentralised system with records existing in ‘blocks’ on multiple servers creating a chain of permanent, etched-in-stone records, which are publicly visible for people to audit and verify. The technology is already powering the digital coin market and has the potential to change the financial technology industry due to its secure way of maintaining records. We mentioned in an earlier blog here The Booster Labs that 2018 would bring the hottest trends in Fintech. Let’s now have a look at 5 areas where blockchain could have a significant impact.
The most significant change to the accounting industry will come with the concept of triple-entry accounting. Debits and credits have been the basis of accounting for years, and with the introduction of blockchain these transactions can be verified in real-time. As a result, auditors will have access to large amount of transactional data, which will allow them to better focus on internal controls. The biggest advantage of blockchain according to the Journal of Accountancy is that it is distributed, meaning that every node on the network has a copy of the ledger; if one system goes offline another will have a full copy.
2. Intellectual Property
With the proliferation of the internet, information and data sharing has been made widely available. At the same time the protection of intellectual property has, as a result, become much more difficult. The Merkle notes that the internet has made it easier for thieves to steal ideas. With blockchain, ownership is established through a decentralized, encrypted ledger that is available to anyone and records the ownership of just about anything imaginable. Unlike the older ledger systems, blockchain stores immutable ‘blocks’ of information on different servers throughout the world with reduced cost and increased security.
3. Cryptographic Signatures
Digital signing of financial documentation will also be revolutionised with blockchain technology, as paperwork will be easier to deal with. All digital signatures can be used in business deals legally, without the need for printing and signing. Bitocin Argentina NGO co-founder Franco Amati explains that with the security offered by blockchain, due to its decentralisation and encryption protection, all digital signatures will be guaranteed to have been made by their rightful owner. This provides the security and convenience of not having to manually verify the signature, saving both time and money. It also allows certification agencies or notaries, who have the public access key, to retrieve the signature and documents, thus, allowing smooth financial transactions.
4. Human Resources
Entrepreneur. com in their feature on blockchain technology detail how blockchain will allow the modernisation of hiring, allowing HR professionals to effectively verify the credentials of job candidates as well as existing employees. The technology seeks to greatly reduce the inaccuracy of information provided by third-party companies on new hires or existing employees. As a result, it could potentially make networking tools like LinkedIn obsolete as blockchain transactions will store all that information in an accurate and secure manner. Blockchain will also create a more accurate and effective approach to taxes, payroll and retirement plans; allowing multinationals more straightforward foreign exchange transactions in multiple countries.
5. Smart Contracts
As self-executing coded contracts running on blockchain networks, smart contracts exist to automatically perform validation steps based on if-then scenarios and encode the conditions of a physical contract. FXCM’s article on blockchain states that once the required conditions are met, contractual agreements are executed automatically. They, therefore, enable safe, secure and transparent automatic administrative activity, drastically reducing human error. With the increasing demand of decentralised apps, smart contracts will need to expand and get, well, smarter to support the demand.
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