Shulou(Shulou.com)06/03 Report--

The technology that may have a huge impact on the future of the world economy may have emerged, which is the "blockchain".

Blockchain is a new technology layer that will rewire the Internet and pose a threat to older traditional architectures.

Blockchain networks have the ability to potentially remove intermediaries or disrupt their current mode of operation, a revolutionary simple protocol that ensures that transactions are completed simultaneously and safely through the use of decentralized public or private ledgers.

The blockchain framework can record almost any value and will challenge and reform the current centralized business model as well as financial services.

The current financial system is very complex, and complexity means risk. The new decentralized blockchain financial system is simpler, using cryptocurrencies and eliminating the intermediary layer. This can help strengthen cooperation among banks and ensure that trust and integrity are at the core of the new blockchain financial system. In addition, system risk can be reduced by using tamper-proof decentralized public / private ledgers.

At the same time, different types of financial products can be brought about by transferring funds in different ways. For the new blockchain financial system, we will see increased financial inclusiveness around the world. The new digital currency will allow those currently excluded to connect to the new financial system, lowering barriers to entry and achieving greater competition.

So how will blockchain change the future of financial services?

Here are some areas that will be affected by the new blockchain financial system:

▼ verifies identity and valu

Currently, trust and authentication are done by intermediaries and burden banks. Blockchain will transfer trust elements to the network core architecture, or even eliminate trust elements. The Know your customer KYC policy (that is, knowing your customers well) will be adopted as a single digital entry and will be protected by encryption and distributed throughout the network, eliminating duplicate entries and authentication. This innovative solution will affect retail banks, wholesale banks, investment banks, asset managers, brokers, payment networks, bandwidth markets, equity crowdfunding, regulators and auditors.

▼ distribution value

They say money makes the world work, and can blockchain do the same? The financial system moves hundreds of trillions of dollars every day while making sure there are no surprises. Blockchain can be used as a criterion for allocating values, which can be assets, currencies, bonds, diamonds, gold, silver, stocks, etc. The use of blockchain technology to allocate value can significantly reduce cost, payment speed, and fraud risk, ensuring that transactions are verified and completed instantly.

Banking institutions are custodians of the values (commodities, currencies, financial assets) of individuals, institutions and governments. Blockchain and payment mechanisms combined with blockchain decentralized cloud storage systems (such as YottaCube.io) will be a more effective way to store financial assets and minimize network security risks.

▼ loan value

Since the financial crisis, market loan providers such as Prosper, Lending Clud and Funding Circle have led innovation in the field of alternative finance, and significant changes have taken place in the loan business. Debt can be issued, traded and settled in blockchain, which increases efficiency, reduces barriers and improves systemic risk. Consumers and small and medium-sized enterprises will use their digital credit fingerprints to obtain loans from their peers.

▼ transaction value

Financial markets need to run hundreds of trillions of dollars of financial assets every day. The introduction of blockchain technology in this market segment will significantly reduce transaction settlement time from days and weeks to minutes and seconds.

▼ hedging and risk management

Risk management is a basic component of the financial system. Ensuring that personal and corporate property is protected from loss or disaster has always been the main task of the financial system, while managing risk through the blockchain reputation system can better protect assets, derivatives, commercial property and improve transparency and efficiency.

Financial value: activities in the financial sector will see a cultural shift from focusing on manual and heavy trading activities to more financial advisory roles.

Accounting: compared with other industries, the digitization of accounting system is still in its infancy. With the emergence of blockchain and distributed account book technology (DLT), the accounting activities of financial functional departments will change.

Blockchain technology can be fully and conclusively verified without a trusted party, and all financial records are kept in the blockchain for everyone to view and verify. Blockchain technology may represent the future of accounting: instead of keeping separate records based on transaction receipts, enterprises can directly write transactions into the joint register (DLT), thus creating an interlocking system of lasting accounting records.

Audit: modern financial accounting is based on dual input system. Double bookkeeping requires outsiders and independent public auditors to verify the company's financial information. Each audit is an expensive job and has long been binding on the company's accountants. The blockchain as a source of trust is very effective for the current accounting structure.

Use digital fingerprints when recording transactions in the blockchain: timestamps are immutable and tamper-proof, which eventually eliminates the need for an external auditor. Blockchain will bring transparency and trust.

Reconciliation: the purpose of reconciliation is to ensure the integrity of the asset load statement in the financial function. The distributed ledger technology award enables reconciliation and payment to be executed immediately, which will reduce fraud risk, operational risk and credit risk.

Reporting and regulatory requirements: the distributed ledger will be the "only version" reported by all financial institutions, and all transaction data will be provided to the trading base and regulators in a uniform form, eliminating the need for time-consuming reconciliations. Through the use of smart contracts, the quality and transparency of reporting transaction data will be increased and reporting costs will be significantly reduced.

Blockchain will improve regulatory reporting, and data collection, integration and sharing will be done automatically in real time from a single source.

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