By: Fintech News
Banking and financial services are changing and adapting to blockchain technologies. At the time of the creation of Bitcoin, very few trusted their ability to transform the world. Probably, the only ones who believed in its disruptive potential were those who worked diligently on its creation, especially Satoshi Nakamoto, the architect of the functional Bitcoin prototype .
Ten years later, blockchain technologies are changing the landscape of the financial industry. Blockchain is presented as an opportunity to transform its management and production model. Security, decentralization, reduction of intermediaries and interconnection are an integral part of the change process.
In banking and finance, systems that meet the aforementioned characteristics are needed to make their processes more efficient. In the beginning, blockchain was seen by these sectors as a threat that had to be eliminated. A report published by Moody’s in 2018 highlighted that blockchain technology contained great possibilities, but also too many risks for the sector.
At present, the wave of blockchain innovation in financial and banking services seems not to stop. It is a phenomenon of global reach, which is felt throughout the world.
From anywhere in the world
However, the opinions of the banking and financial sector on the usefulness of blockchain technology is not homogeneous. For some, the blockchain is still complex, expensive, not interoperable and unnecessary in a world that can be interconnected through centralized means.
Faced with this assessment are those who believe that blockchain is an opportunity to improve and reduce services and allow better interoperability between these services and customers. In addition, from anywhere in the world and with total security.
For Alejandro Palomar, founding partner of the Panamanian company Blockchain 360 Solutions, this technology, by facilitating the automation of many processes, will facilitate great savings. For example, it will reduce costs in processes related to structure, which are currently very high.
A few words that once again gained prominence with the recent issuance of a 20 million dollar bond on the Ethereum blockchain . In addition, the Bank’s participation in proposals such as those of Ripple or the recent investment in Securitize must be added .
Blockchain bets of large financial corporations do not stop at Santander. JP Morgan has created Quorum blockchain , a private Ethereum clone designed to simplify operations in its financial infrastructure. Or the solutions proposed by R3 , Ripple and Stellar . All these blockchain seek the creation of bridges in the transformation of the transaction system established in banking. In all the cases cited, blockchain allows you to drastically optimize business processes by sharing data efficiently, safely and transparently.
Ethereum, the platform chosen for banking and financial transformation
Throughout the transformative process of blockchain finance, Ethereum and its smart contracts are taking on a special role. Thus, although Ethereum 2.0 remains a promise in the future for the users of this blockchain, progress towards its construction is growing day by day.
In parallel to the development of the network, Ethereum is currently experiencing a convulsed and rapid growth thanks to traditional banking entities and new fintechs startups. A sample of the impact of Ethereum in the banking sector was reflected in Sibos London 2019 , where large blockchain industry, such as ConsenSys, presented an arsenal of uses . All these events underline that Ethereum has become the preferred platform to tokenize services and financial assets.
In addition to Santander, banks such as Société Générale, UBS, Barclays, Bank of America, BBVA , are also beginning to experiment with Ethereum’s capabilities.
Financial services without banks thanks to Ethereum
In all this transformative movement of the financial industry with blockchain, DeFi (Decentralized Finance Platforms) projects, developed to facilitate access to financial services from anywhere in the world, take on special relevance. MarkerDAO and its stablecoin DAI , Augur , ETHLend , Bancor or Kyber Network are just a sample of what DeFi can mean in the future.
DeFi projects represent the birth of a new class of financial services available to everyone, without the need for intermediaries. From decentralized exchange platforms such as Binance DE X or the Spanish Bit2Me DEX , to credit services such as ETHLend or insurance and investment platforms such as tZERO.
It is about making available to anyone who wants the opportunity to access loans quickly and easily, without the intervention of banks. Or to contact investors to finance the development of projects and that these investments can be fully traced, in order to know if the agreements have been fulfilled. The common denominator of all these platforms is Ethereum.
Therefore, it does not sound strange that DeFi and the companies that present this type of services multiply their presence worldwide.
Competitive advantages for banks
The new financial landscape that emerged from blockchain shows that the blockchain is drastically changing digital cash transactions and that current business models are being interrupted by new and effective financial platforms.
From the perspective of auditing and regulation in administrative operations, the guarantees of transparency and security provided by blockchain technologies are especially relevant. Therefore, the competitive advantages will be for those who first embrace these technologies. Although the signs may still seem small, they contain future-laden opportunities.