Use of Blockchain Technology for Finance Professionals

Use of Blockchain Technology for Finance Professionals

It is one of the safest methods to create, modify, share and store information, generating confidence throughout each point of contact.

There are new concepts in emerging technologies, such as artificial intelligence in its dimensions (machine learning and deep learning), augmented reality, quantum computing, and automation of processes based on robots. Terms like blockchain are already used by organizations, media and people;  However, there is still a knowledge gap to solve about its functionality, impact and benefits.

The blockchain is a tool that works through a chain of blocks that are linked and encrypted to  protect the security and privacy of transactions,  generating confidence throughout each control point. In other words, it is a distributed database that holds the promise of fundamentally transforming the way in which business is done, making the interactions between companies safer, more transparent and more efficient.

Jorge Arias, general manager of Oracle Colombia and Ecuador affirms that “companies are called to understand that digital transformation is deeper than simply having the latest technology.  Its meaning is focused on creating simple, fast, personalized and reliable experiences,  so that customers find new ways to create income generation flows, and finally, simplify and automate processes so that they are reflected in operational efficiency; that is why it is important to implement solutions that reinvent the business model and facilitate processes in an organization. “

Transversal to all these business impacts that brings digital transformation this Blockchain, which Arias says “is synonymous with confidence, simplicity, agility and flexibility in B2B, B2B2C transactions that were traditionally governed, controlled and brokered by third parties that will no longer be part of the process,  but that were characterized by adding on costs that made these transactions slow, unreliable and inefficient.

A SIMPLE EXAMPLE

Imagine that you have a child in college and send a monthly payment to cover your expenses through a bank transfer, which generates two records of the same activity: a debit registered in your bank account and a credit in your child’s account , but one  can not see the bank record of the other  because those entities keep separate accounting books on behalf of their clients, and make sure they are accurate and private.

And if you do not want the books to be private? What happens if you want both you and your child to have access to a single accounting book with visibility of all transactions?  That is solved with the generation of a joint bank account, but today there are more options thanks to blockchain.

Following the example, imagine that every time you send a monthly payment, establish a block with the information of the transaction (date, time, amount, etc.). Both you and your child can see the block, confirming that the money was sent and received. There will be no possibility of claiming that the transfer never arrived, since the support of both accounts exists and is visible.

Each month, you can place more blocks, which form a chain where a record of all transactions is created. As time passes, you can point to the chain, show how much money you paid for college and ask for a return on investment. 

Broadly speaking and with a simple analogy, this is the way blockchain works. Each block is a record of a monetary transaction. The chain is a shared ledger that is visible to parties that are involved in each of its multiple networks, or nodes. Each new transaction is verified by all the nodes and, if it is valid, it is added to all the copies of the book, that is, a new block is added to the chain.

The chain is cryptographically protected, so no one can change a record once they have registered.  Even if you find a way to avoid cryptography, the logs are visible to all members, which makes it almost impossible to change a block without someone noticing it even if it is possible to establish new blocks.

IMPLYING?

Generally, accounting systems have a double entry of information that help build the institutions where the modern financial world rests.

The concept of exchanges and transactions of all kinds, including money, commodities, stocks, loans and products, requires each participant to track each transaction using its own ledger. Most of the time this works, but sometimes they have information that does not match; which leads to audits, distrust and greater scrutiny.

The difference with blockchain is that all parties use the same accounting book, giving visibility to the participants. In other words, books can never be out of sync when there is only one. This new method for the maintenance of monetary records offers multiple benefits, such as:

Increase in transactional confidence:  due to the visibility it gives, it is easier to have a clear process.

Fraud reduction:  for that same visibility it is difficult, if not impossible, to hide, distort or eliminate monetary or other transactions.

Reduced risk:  with more confidence and reduced fraud, business risk also decreases.

Lower transaction costs and faster processing times:  Fewer systems and organizational infrastructure simplify and accelerate the entire transaction process, for less money.

In Colombia there are several blockchain initiatives and, according to Jorge Arias, Oracle has been developing pilot programs with different companies in industries such as health, insurance, manufacturing and banking companies, as well as government regulatory entities.

Source: http://www.portafolio.co