How will Ethereum be used in finance?


The current system relies on human expertise being at the core, which is still limited but significantly cheaper than computers. Check platform like to utilize the best trading strategies to make your Ethereum trades profitable. However, the advent of blockchain has the potential to change this, with the Ethereum platform offering a solution that enables a decentralized form of automation. In addition, the blockchain removes the need for a middleman and provides transparent security within any supply chain structure. But, first, let’s discuss how users in finance will use Ethereum.

Utterly decentralized finance:

The Ethereum blockchain enables developers to build applications. On the surface level, the applications are for payment systems and financial services, but there is also potential for supply chain finance. One company working on the Ethereum blockchain is Slockit, which provides solutions for intelligent locks. In addition, the company announced a significant partnership with Deloitte in early 2016 to work toward bringing technology to businesses.

The goal is to develop secure and tamper-proof cloud-based systems that users in international supply chain finance can use. It could include running transactions between companies in a supply chain, such as countries, or even multi-party transactions.

Supply chain finance is not the only application for Ethereum, and other applications are in the works. Recently, Goldman Sachs released a report showcasing new ways companies could use blockchain technology for supply chain finance. One of the hypothetical applications would be to increase transparency by creating an audit trail of all transactions along the chain and decreasing fraud by increasing security through cryptographic systems.

Better Asset Management in finance:

The current asset management industry is generally centralized, which leads to inefficiency and high fees. As retail audiences shift toward technology and cutting-edge technologies, they seek alternatives. One of the key innovations that have taken place with Ethereum is the introduction of smart contracts in finance.

A smart contract is a computer program programmed to automatically execute transactions between parties based on predefined rules without any explicit verification from anyone. Another improvement in efficiency comes from the use of a blockchain network.

 Instead of using one central server to manage records, multiple servers are connected and synchronize each other’s records to form a chain. As the chain grows, each block or record is validated by multiple nodes, which run on a consensus protocol and thus keep the data stored safely within the chain’s system.

 When data is being stored on blockchain systems, it is possible to get better security and immutability through cryptographic verification that cannot be changed by anyone retroactively without invalidating all previous changes.

 “Ethereum for Finance”, a whitepaper by Alex Tapscott and Don Tapscott, goes into more detail about Ethereum’s potential for finance. Their whitepaper discusses various ways financial institutions and other companies can use blockchain technology to sustain and grow their businesses. Banks must recognize this change because there are many advantages to using blockchain technology rather than centralized systems.

Banks could benefit from Ethereum.

Banks are the most complex system of all financial services today, with many intricacies, including operational, compliance, legal, and more. While there are many benefits that banks can gain from Ethereum technology, it is only the start of recognizing blockchain technology.

Blockchain technology offers many advantages, and even if banks cannot fully adopt all of these advantages, they should at least recognize that blockchain and DLT are the future. Therefore, banks should adopt blockchain solutions or partner with startups and new companies. A few key areas of interest would be distributed registry systems and permissioned ledgers to reduce costs while increasing security.

Better control over funds:

The current system of finance and payment systems are overly centralized. For example, even though the majority of the payment is done through credit card transactions and checks, the funds may be stolen or frozen by government authorities used without permission. The Ethereum blockchain has a decentralized mining process that creates blocks that store data.

The miners have to approve all records before nodes can add them to the chain’s system, and thus, there is no way for any single entity to change a record without proper approval from other nodes on the network. It creates a more secure system that can provide better control over funds and transparency in business processes.

A lesser remittance and transaction fees:

There is a high cost of sending money across borders through centralized payment networks. People can use the Ethereum blockchain to create various applications to solve this issue.  These solutions are electronic contracts that are automatically executed when certain conditions are met, thus reducing costs and increasing efficiency in the remittance industry. Furthermore, since decentralization is a core feature of blockchain, users can transfer the native ether token to one another without paying hefty transaction fees.