The blockchain is one of the world’s leading and disruptive technology for digital assets. We are using new technology to build a better financial system. The term “Blockchain Technology” typically refers to the clear, trusted, the in public accessible ledger that allows us to securely transfer the possession of unit’s important exploitation public key encryption and proof of work methods. The technology uses suburbanized agreement to keep up the network, which means it is not centrally controlled by a bank, corporation or government.

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The financial sector has become a part of our daily life interaction and a method of verifying and tracking transactions. Instead of a trustworthy third party or a financial organization, it depends on agreement among a peer-to-peer network of computer supported complicated algorithms. Blocks of time-stamp transactions are decentralized on all systems. Blockchain is currently a concept that has received significant attention in financial technology (FinTech). It combines several computer technologies including distributed data storage, point-to-point transmission, consensus mechanisms, and encryption algorithms. It has also been identified as a disruptive innovation of the Internet era. However, as blockchain is a major breakthrough in data storage and information transmission, it might fundamentally transform the existing operating models of finance and economy, which might lead to a new round of technological innovations and industrial transformation within the FinTech industry (Mu Qi-Guo 2016).

Blockchains are decentralized and permissionless, which can lead to major disruptions in the financial sector, especially in payment clearing. Since 2015, a number of major international financial institutions have begun to formulate plans for the blockchain sector. Goldman Sachs, J.P. Morgan, UBS, and other banking giants have all established their own blockchain laboratories, working in close collaboration with blockchain platforms, and published a series of studies on this topic. Goldman Sachs even filed a patent for transaction settlement based on blockchain technology. Additionally, various national stock exchanges, such as the Nasdaq Stock Market and the New York Stock Exchange have also conducted in-depth research on blockchain technology. On December 30, 2015, Nasdaq announced that it had completed its first security transaction using the blockchain transaction platform Linq. Furthermore, the US Depository Trust & Clearing Corporation, Visa, the Society for Worldwide Interbank Financial Telecommunication, etc. have also expanded their plans in the blockchain technology sector.

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Gupta and Gupta (2018) provide an overview of Blockchain Technology with its benefits emphasizing on the applications of this technology in the Indian Banking Sector. One disruptive innovation which is changing the banking sector globally is Blockchain Technology (BCT). An empirical research can be undertaken in future to present the growth of Bitcoin Technology in India with respect to other developing countries.

Guo and Liang (2016) conclude that blockchains have a technological advantage over banks as credit intermediaries. It is still too early for this technology to completely disrupt the existing financial year. Therefore, a “multi-center, weakly intermediated” scenario is likely to emerge. This is where banks use blockchain technology to improve their payment clearing systems and overcome certain obstacles in information communication, while also forming consortiums, thereby consolidating their position. Chinese banking and fintech markets are evolving with the implementation of new technology, Chinese Blockchain Technology and Application Development, 2016. Blockchain applications also promote the formation of “multi-center, weakly intermediated” scenarios, which will enhance the efficiency of the banking industry. The decentralization and self-governance of blockchains dilutes the concept of regulation, and has a critical impact on the existing system.

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Barnes (2015) confers that banks like UBS, ING and Nasdaq are exploring the potential of the technology to be able to overcome the challenges that remain, not least security and regulatory issues. The technology behind Bitcoin – has revolutionary potential. It could transform almost every aspect of commerce and make standard internet transactions seem old fashioned. We have thought about the memory of money via a blockchain. That’s an idea we would love to drill down into, but a little bit further down the road. Can we use this to replace existing technology, whether for transfers or payments or in the security space? Banks are making the choice to move to a 24/7 real-time payment service not only instant payments but also instant business. Discussions of what kind of technology to use is an interesting dilemma. Rigor through TAM is required to analyze the adoption of this new technology.

Degener (2018) compares the Rabobank and fintech start-up Ripple in order to filter out implications to the business model of traditional banks integrating blockchain technology to process international payments. Ripple represents a value proposition, offering a ‘blockchain-as-a-service’ solution, RippleNet, to which traditional banks can simply plug in. The current situation of the cross-border payment systems applied through the case of the Rabobank and the information technology perspective of Fiducia GAD. Further light is spot on the case of Ripple as representative of a blockchain based solution for a cross-border payment system. The findings suggest that blockchain technology is less likely to be successfully implemented by traditional banks in an isolated way. Instead, it seems more viable for banks to collaborate with fintech organizations, like Ripple to capture value from the blockchain technology on a larger scale.

Ittay (2017) states that the financial technology (FinTech) sector sees high potential value in cryptocurrency blockchain protocols, or distributed-ledger technology (DLT). However, the requirements and guarantees of blockchains for cryptocurrencies do not match those of FinTech-from transaction throughput to security primitives and privacy. The author explores how blockchain research beyond Bitcoin is closing these gaps and some of the challenges that remain. Blockchain systems can be roughly split into four layers. The system clients are at the top, and they observe an abstract system state, such as a balance sheet stating how much currency each account has. This abstraction is facilitated by a virtual machine layer that accepts transactions and translates them into state changes. New possibilities and challenges will continue to arise as DLT adoption increases in FinTech. The full potential of blockchain technologies will only be realized through direct and effective collaboration between the FinTech industry and the blockchain scientific and engineering community. Blockchain security relies on public verifiability of its integrity. Each node observes all blocks and transactions and can verify that the transactions are legal and the blocks are correctly formed. Nodes do not create money or replace it.

According to Hassani, Hossein, et. al., (2018), there exists a gap in research and development into blockchained big data in banking from an academic perspective, and this gap is expected to have a significant negative impact on the adoption and development of blockchain technology for banking.

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In Bates and Paul Migliore (2018) the authors explore the transformative technologies that will drive digital insertion efforts in the future, how asset managers will need to differentiate themselves in the new digital landscape and practical steps to embrace the digital frontier for organisations that are still held back by legacy technology, processes and behaviours. investment managers have been digitising information and processes, but we have only recently moved into a new era where firms are reengineering every facet of the business upon a digital foundation. The future state design options should be derived through an open dialogue with vendors about their current and future product offerings. Leveraging the resources and scale of an external provider helps asset managers mitigate risk by minimizing initial investment and leveraging technologies, tested by a subset of their peer group. These considerations will become increasingly important components to a future state option analysis, as the competitive landscape shifts to automation, processing of complex data and sophisticated AI toolsets.

Umarovich and Natalia (2017) conducted the research of current trends and priorities for the blockchain technology use in order to ensure economic security of large corporate entities. The application of blockchain can be further analyzed in the light of significant proof. The conducted analysis of the blockchain application risks and benefits demonstrates the need in balancing risks and benefits of this technology application.

Azarenkova and Shkodina (2018) focused on proposing ways to reduce the negative impact of financial technologies on financial system stability. The analysis of the financial technologies’ impact on the stability of financial system shows that the lack of institutional support for new financial technologies is the most important catalyst for the financial industry destabilization and the formation of financial bubbles in various market segments. This paper considers the application of new technology at global level.

Petrushenko and Kozarezenko (2018) identify disruptive challenges for financial institutions need to adapt. The aim of the research is to investigate the prospects of FinTech engagement into the system of international transfers processing in Ukraine. The research investigates the value and the investment flows structure as most obvious indicators of FinTech and describes types of payments relationships there. The paper considers relationships between enterprises, financial institutions and individuals, which are formed in digital payments, conducting a comparative analysis of the regular and innova- tive cross-border payment processes, developing a methodology for evaluating the impact of FinTech engagement into the system of cross-border payments in Ukraine, and investing foreign experience of FinTech start-ups participation in the international money transfers system. The paper shows that investments and profits of cross-border payment solution can vary significantly between countries as each country has separate and diverse national payment systems. FinTech can help to proceed in this direction enhancing in the system and allow people to proceed more effectively. There is a high potential of FinTech for cross-border payment processing in the future.

Cocco, Pinna, et. al. (2017) paper looks at the challenges and opportunities of implementing blockchain technology across banking, providing food for thought about the potentialities of this disruptive technology. It defined three quantities: “economic efficiency”, “operational efficiency”, and “efficient service”. First EE, defined as the ratio between the value of bitcoins mined by the power consumption of 1 kWh, is characterized by a strong variability because it is influenced by the growing of the Bitcoin price, the Bitcoin popularity and the power consumption of the network. Second, we found that the OE, defined as the ratio between the value of voluntary fees and the energy cost of a transaction, is currently growing, indicating that fees are becoming more and more important to assure the sustainability of the Bitcoin system. In fact, mining operations will be remunerated only until the sum of circulating bitcoins reaches 21 million. SE, defined as the ratio between the number of transactions validated by the power consumption of 1 kWh, which describes how much electricity the network spends to number of transactions per block is limited, and the SE cannot increase performance of its main service, i.e., to wire bitcoin.

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In Christopher (2019) the bridging model is applied first to traditional banking, to illustrate and analyze the enforcement mechanisms underpinning the U.S. dollar as currency and the banking system as a whole, and to demonstrate that the enforcement mechanisms (government backing and regulation) are not as robust as generally believed. The bridging model is then applied to Bitcoin, to show not only that the system requires more trust than is generally understood, but also that both currency and payment systems benefit from the involvement of trusted intermediaries in response to problems and crises. This article undertakes a critical deconstruction of Bitcoin and the blockchain, their themes of democracy and transparency, and the idea that they are trustless. The article enforcement and trust in contract formation model, which allows for a more nuanced understanding of the interplay between conceptualization of the role of trust in business and contracting: the bridging then proposes a new framework. The Bridging Model Applied to Traditional Banking: As an illustration of the bridging model in application, this Part applies the model to traditional banking, understood roughly here to mean the brick-and mortar U.S. banking system of the past hundred years or so. Although Bitcoin contains mechanisms that make it predictable and reliable-the regular production of bitcoins, the publicly verified ledger-these mechanisms still rely on human involvement. Moreover, the Bitcoin code may strip away instances where trust and human overrides are actually preferable, in that they allow considered responses to unanticipated problems.

To be continued..


The above chapter is an extract from the research paper published by Dr Arun Khatri, HOD, Digital Business- HETIC, Bengaluru

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