Write aims to assess how exactly blockchain technology fits into the current system of banking, its advantages and disadvantages?
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Blockchain technology is focused on transforming the banking system by providing a secure and reliable technology with transparency. It assures data safety and reduces fraud risk by providing an immutable ledger of transactions that can be seen by all participants.
Generally, it offers numerous advantages to banking systems.
(1) Encrypted data is arranged chronologically, which ensures its safety from tampering.
(2) Transactions are recorded on the public ledger for transparency.
(3) Thirdly, it eliminates intermediaries and streamlines the whole process by reducing transaction time and cost.
(4) The method of decentralisation assures that not a single entity has control over it and fosters trust among users.
However, some challenges make its execution difficult, and below are some disadvantages of it.
(1) Current blockchain systems have slower processing times because of the high volume of transactions.
(2) At present, mining and maintaining blockchain networks consume a lot of power and energy for computation.
(3) Widespread adoption is uncertain because regulatory bodies are still developing.
(4) The existing infrastructure is not sufficient for using blockchain technology with existing systems. It requires new infrastructure and training.
Eventually, blockchain offers various opportunities, and dealing with its constraints is vital for its adoption.
Blockchain technology can be defined as a distributed ledger technology for storing information in a manner that makes it tamper-proof. It works on protocols designed to make an agreement among different parties who do not trust each other so that they can work together to achieve different purposes which benefit the whole group.
In the current system of banking, blockchain technology can be used to store information in a decentralized manner, making it accessible to all and verifiable by everyone. This technology is permanent, meaning that records or information stored using blockchain technology cannot be lost.
The advantages of blockchain technology in the current system of banking include:
Here are the disadvantages of blockchain technology in the current system of banking: