Blockchain Technology: Will It Change The Way We Bank?

Blockchain is a computer program that carries time specific data which is distinct and cannot be modified. This data is controlled by a cluster of computers and is not owned by any single entity.

- Jatin Khanduja

The data is carried in blocks and is linked to each other using cryptographic principles (Chain). The salient points of Block Chain is that the data is not central, is transparent and is open for everyone to see. A blockchain has no transaction cost (although infrastructure is required to support the functioning of Block Chain) also block chains can be used for carrying any kind of data may be financial or non financial.

Of all the purposes for which the block chain has found uses, the impact on financial domain has been the most effective.

The concept of block chain is such that the data on any block cannot be modified on an standalone basis and if the data on any block is modified than the data on all the blocks gets changed and since the data is verifiable on many systems such a change would easily be detected hence for all practical purposes the integrity of data on a block cannot be tempered with.

Block Chain has the potential to disrupt the way we do business and it could practically lead to the elimination of third parties and connect the seller directly with the buyer and with the transaction costs being negligible the overall costs could come down drastically and lead to better efficiency. The scope of block chains is enormous however we would limit ourselves with the study of impact and potential of blockchains on financial sector which is the scope of this reading.

The phenomenal rise of Bitcoin with its peak at $20000 had had everyone including Investors and Regulators astounded alike. The investors were exposed to the huge potential offered by the these investments and regulators suddenly woke up to the challenges and opportunities posed by these new form of virtual currencies which had the potential to uproot the authority of the central banks as the issuer of currency and overhaul the financial system.