When hearing the word “blockchain”, you think about Bitcoin, Ethereum, and other coins in the crypto market. Previously, blockchain was only found in the crypto world and never within the “real” economy, including banks, hedge funds, and shops. However, much has changed; many financial institutions worldwide now use blockchain technology. This article discusses blockchain, which is currently used within banking.
How banks use blockchain
To simplify reconciliation
Reconciliation represents data reconciliation, usually performed by dedicated employees or automated programs. The sheer number of these programs is vast. Until recently, no single registry or service collected massive amounts of data. Nevertheless, blockchain technology is now processing the information and managing its unique performance requirements. Resulting in faster processes and more efficiency, requiring fewer resources and money whilst benefiting a business and its employees.
To abandon systems like SWIFT
Western countries have changed interbank transfers, first with Iran, North Korea, and then Russia. Blockchain enables you to abandon these services, restoring instant and virtually free transfers to financial or credit organisations. Blockchain makes it easier for bankers and businesses affected by global political situations. It also helps you send money to your mother abroad because sometimes the inability to make transfers using a single international system also affects individuals.
You might think that using blockchain within banking is a lot of hot air. Wrong! In 2019, two major German banks – Commerzbank and Landesbank Baden-Wuerttemberg, conducted their first test transactions on a factoring and bill payment blockchain platform. This service is now a major player amongst similar blockchain platforms. Its main competitor is PLCU, a cryptosystem with its own coin. It has been under development since 2016, allowing the creators to consider the problems other crypto projects face and develop a successful solution from the user’s point of view.
Now the coin exists in its own infrastructure, enabling transfers, purchases, and investments to be made instantly and commission-free. The mastermind behind this, Alex Reinhardt, is convinced that blockchain used in the “real” economy and within banks has excellent prospects that need to be carefully examined and developed.
To create space for automatic decision-making
Programs that decide whether to issue a loan to an individual may consider outdated information or disregard up-to-date information. They can reach a decision based on specific patterns unrelated to the borrower’s suitability, and reject those with an excellent credit history. Blockchain avoids this: it accumulates relevant information before making decisions. Blockchain-based programs can evaluate candidates using special scales, provide individual recommendations for every user, integrate this with AI, and significantly improve performance.
How blockchain is being incorporated into financial institutions
Financial service industries use blockchain to automate their work. These programs analyse data similar to the banking sector, helping evaluate investment targets or company assets, the prospects of preferred shares, including all the parts of the derivatives market and its equivalents.
Blockchain helps financial companies store vast amounts of data. In 2014, investment banks Goldman Sachs, Barclays, and J.P. Morgan formed a consortium to explore employing innovative technology within the financial sector. This is how distributed registers emerged in companies considered the leading players in the industry: blockchain was managed and not decentralized, network participants could be identified, certain data could be hidden, etc.
However, not all companies can use registries currently: it requires a large data storage capacity and professionals who can use it. Besides, not every company would agree to implement this because it is often easier and cheaper to operate in the usual way over the short term.
The PLC Ultima ecosystem, which we have discussed, disagrees with this vision. Blockchain is at the heart of all its developments, be it a crowdfunding platform allowing you to invest cryptocurrency in interesting projects and help those in need, or a shop which accepts cryptocurrency. Both projects are financial: accepting and processing payments, storing funds, etc.
Both exist solely on a blockchain, which supports internal operations, distributes information, creates automated responses to particular user actions and is responsible for making payments. Blockchain is at the heart of most transactions in the PLCU ecosystem, designed to simplify financial arrangements between users worldwide and increase access to financial services for all.
The blockchain networks that the PLCU project uses are virtually impossible to hack; originally intended as an extremely secure configuration, and when properly deployed, they become inaccessible to hackers familiar with loopholes in similar small systems of this kind. These loopholes have been examined by blockchain industry experts and eliminated, so there is no need to worry about the security of blockchain-enabled services.