If there is any technology that holds the potential to create a ground-breaking change in the fiscal industry, after the internet, it has to be blockchain. A cutting-edge version of Distributed-Ledger-Technology, blockchain is fast becoming a disruptive force in almost every sector of life and living. When it comes to the financial sector, blockchain technology is especially aspiring to revolutionize the global fiscal order through the help of cryptocurrency. Crypto is the most famous blockchain development; crypto and blockchain together is a mighty force that the world probably had been waiting for long.
Blockchain and crypto
Technically speaking, blockchain is a shared distributed public ledger that documents information and safeguards data with the help of cutting-edge encryption. The blockchain platform features a decentralized environment where operations are executed without the help of centralized authority. A blockchain network assures complete transparency that eventually allows full visibility of data stored in the blockchain ledger. Another salient feature of blockchain technology is immutability. All the data that is entered into a blockchain ledger cannot be altered or manipulated by anyone.
The blockchain market is evolving fast. If the market prediction is to be believed, the blockchain market is estimated to touch $67.4 billion around 2026 from $4.9 billion back in 2021.
Well, Crypto and blockchain are often cited together but these two are not the same. Blockchain is the base technology upon which cryptocurrencies are developed. Cryptocurrencies can be defined as electronic money that follows a direct P2P approach. As cryptos are a blockchain application, these assets also follow a decentralized nature of transaction- crypto payment transactions do not involve 3rd party or intermediary.
The crypto market surprised the world by touching an awe-inspiring $3 trillion figure in 2021. Unfortunately, the emerging asset met with a loud crash in the year 2022 and since then has been recovering to regain the former glory. However, according to experts, the crash, no matter how catastrophic, would not hinder the future growth of the crypto industry. If we follow market predictions, then, the crypto industry is about to proliferate by 5x by the coming 7-8 years.
How crypto and blockchain are bringing a change in the fiscal sector?
Affordable and faster payments
This is certainly one of the most fundamental ways by which crypto and blockchain are changing the global fiscal order together.
As a result, crypto-based transactions do not call for intermediaries to settle the payment. This is completely different from fiat-based payment transactions that use 3rd parties to settle payments. Since crypto-based payments do not involve 3rd parties, the clearance, as well as settlement of payment, happens in a way faster than that of fiat transfer.
Faster settlement of transactions would help multiple financial services to process their services in a quicker way. For example, crypto and blockchain will allow faster processing of loans, quicker settlement if security purchases, and so on.
This is especially vital in regard to international payments that are usually expensive given the high costs associated with intermediary processes. It has been predicted that blockchain adoption could help to save $27 billion for banks by the final quarter of 2030 on cross-border transactions.
Blockchain-based cryptos facilitate direct processing of cross-border payment transactions that allow almost immediate settlement and also at much lower costs than that of conventional fiat-based international transfer. This particular reason has single-handedly inspired several small businesses to aim for global reach that were previously afraid of targeting foreign customers given high costs associated with international transactions.
Alternate payment and investment asset
As of November 2022, over 15,000 businesses accept crypto. Bitcoin alone commands 190 million users globally.
Well, crypto and blockchain have given the global fiscal world an alternate payment system as well as highly potential investment tool
This is another reason why crypto and blockchain are considered to be a revolutionary force in the contemporary financial world.
The fiat-based traditional financial world features unfair disparity where the centralized governing authorities often favor the rich over the lower income families. As a result, a huge sector of the world population still belongs to the unbanked category. Most of them are unable to afford the expensive bank fees that 3rd party financial intermediaries impose on financial services. The problem is especially rampant in underdeveloped countries. However, developed and first world countries like the USA too have got a considerable number of people in the unbanked category.
Well, crypto and blockchain together aspires to solve the problem by democratizing finance for the whole world. In fact, one of the main ideas behind launching Bitcoin was to provide the world finance ecosystem with a democratized way of carrying financial activities.
Safe processing of finance
Cryptographic protection is one of the salient features of crypto and blockchain.
Crypto transactions are processed under the protection of encryption technology which helps to keep nefarious elements at bay.
Safekeeping of confidential records
The finance industry deals with confidential information about customers and businesses and needs a secured safe-keeping of major documents. The blockchain platform comes as a savior here by offering its guarantee of immutability.
Moreover, financial institutions could also limit access to their confidential data stored on blockchain. A blockchain platform allows users to set a level of accessibility on their stored data. This way, the financial service company heads can decide who could access the records and who all could not.
Faster contract execution
Financial services often involve processing and transfer of contracts. The traditional process of contract execution involves an elaborate process as it incorporates 3rd party services. But, crypto and blockchain, especially blockchain solves the problem through the help of smart contracts.
Smart contracts can be defined as blockchain applications that execute a function automatically once certain pre-set conditions have been made. For example, stock exchanges can take the help of blockchain smart contracts for immediate and automatic processing of futures trading contracts.