Blockchain is a technology that make quick transactions on a network with no middlemen (e.g; banks).
Basically, the blockchain is a chain of blocks with information. It uses cryptography to secure the data. This technology is an open distributed check. It can record transactions of two parties securely and efficiently. Moreover, Blockchain manages by peer-to-peer networking. It concurrently together to solve difficult mathematical problems in order to validate new blocks. Data can’t be update after recording. That’s why this technology secure and not vulnerable to hack.
Banking System and Blockchain Technology
Blockchain technology is one of the intractable technologies of this age and will be of future technology. However, the idea of share checks existed for some time. So, Banks share their checks with financial institutions including banks. But the difference with private blockchain lies in decentralization.
Banking Systems characterizes by central banks, as, they operate in centralize system. Whereas, a private blockchain does not have a central authority and that’s why the system is decentralize.
Can Blockchain technology and banking system co-exist?
So, to understand, which one is the best one, it is important to see what the two situations offer.
- The banking system exists for decades and it is therefore tried and tested. However, it also has its downsides such as slow and expensive transactions.
- On the other hand, the private blockchain means there is very little regulation and thus opening doors for evils. For Example, money laundering, facilitating drug trafficking as well as funding terrorist activities.
In short, both the banking system and blockchains have their strengths and weaknesses. So, there is the third option might be possible. It is the interdependence between privacy blockchain and the banking system. Additionally, it is something that has already started happening.
Developers are working on hybrid blockchains which feature a combination of public and private blockchains. So, that can be use by banks and other financial institutions to deliver financial services. One such example is Ripple’s (XRP) blockchain which facilitates rapid transactions and is also design to enable cross-border banking.
Public blockchains are known to be slow and expensive while private blockchains are previously criticize for encouraging the use of cryptocurrencies for illegal purposes. Hybrid blockchains are design to overcome these issues while also making it possible for the integration of blockchain technology into the banking system. Cryptocurrencies might, therefore, have a place in the future of the banking industry as banks and other traditional companies become more open-minded about the possibilities of digital currencies.