Blockchain: The Future of the Global Finance Market?

If you are reading this then you must know – or at least must have heard about – Bitcoin and how it can potentially change the world as we know it. Bitcoin, or whatever cryptocurrency that you may have been introduced to, might be this incredible, revolutionary concept that has got you equal parts excited and skeptical, but what is really gotten the whole Internet abuzz is not really the crypto-coin itself. Brilliant as cryptocurrency might be, it would not have gained this much widespread popularity and support without the launching of the blockchain

Blockchain technology is without a doubt the main reason why cryptocurrencies have gotten so much positive feedback worldwide. Before blockchain was introduced nearly a decade ago, cryptocurrency barely kicked off the ground. The few cryptocurrency proponents that leaped to streamline their concept of virtual money only met with crushing failure. However, when the now infamous (and still largely anonymous) Satoshi Nakamoto sent out his white paper detailing the peer-to-peer electronic cash system of Bitcoin, cryptocurrency exploded. To date, the Bitcoin blockchain is reported to record around 300 million transactions. And it is still growing!

Now, for the uninitiated, a blockchain is a secure digital ledger with huge potential not just in the cryptocurrency market. Yes, cryptocurrencies are the first major applications on top of blockchain technology, but it is far from limited to the crypto trade. Outside of Bitcoin and other alternative coins (altcoin), blockchain technology is being developed for other fields and industries. It works like this: a blockchain for a certain application (Bitcoin, for example) is constantly growing new data blocks that record transactions that occur between users. Instead of storing all of the app’s information on a central computer, the blockchain distributes data across a group of computers known as nodes. Each node has a constantly updated copy of the blockchain. That is why blockchain has been described as decentralized (no single entity has control of the data) and public (everyone has access to it).

Most of the blockchain tech revolution might be invisible to us – though we do get a lot of news about the crypto market, the good and the bad – but the field is bustling with activity. The blockchain is just that ripe for potential and everyone interested in innovation and technology wants to get a chunk of that pie otherwise they will be sorely left behind.

Cryptocurrency skeptics can lambast Bitcoin and altcoins all they want, but there is simply no denying that the technology that makes virtual money possible, the blockchain, has the capacity to change a multitude of industries drastically.

The field that will probably be the most affected, analysts have proposed, is the finance market. Not too surprising since the blockchain’s initial application was for the cryptocurrency, an alternative to fiat currency and traditional banking. But before we go on to explain how blockchain can be a disruptive force in the finance market, let us first discuss the characteristics that make blockchain so appealing to innovators and developers in the industry.

Blockchain Advantages and Characteristics


As mentioned earlier, a blockchain is decentralized, meaning no one person or entity can ever have sole authority over it. This is probably blockchain’s most advantageous aspect.

The Internet may be incredibly useful for the most part but it does have one fatal flaw: users do not have much control over the data they share in websites they visit. There is always a middleman that oversees and manages user information and that in itself poses a host of problems. The recent Facebook scandal opened a lot of people’s eyes to how risky it is to put one’s trust in one huge company that only has its interests in mind.

With the way blockchain is designed, there is no need for users to rely on a third party to process and store user data. Instead, the data is distributed across a network of nodes – depending on the blockchain, we could be talking hundreds to thousands of nodes – and is kept safe from opportunistic companies. The blockchain is also quite impenetrable from any type of hacking. A hacker would have to break into the entire network of nodes which is impossible to do and would require an extremely powerful computer too.

Additionally, because there is no controlling third party, users will have direct access to providers. This means that services and products would be cheaper since there would be no transaction fee required by the middleman.


Another great thing about the blockchain is that it is highly resistant to outside tampering or other changes. Once you write or transact something, it will be stored in a block and will be permanently unalterable. By using cryptographic methods, data in the blockchain is locked and immutable.

Blockchains use the cryptographic concept of hashing which reduces data to a string of seemingly unconnected numbers and letters. Altering even just one character in the phrase will produce an entirely different hash code, then you can’t go back to find out the original data from the hash. Hashes are connected in the blockchain so any change, however minute, will be immediately visible.

A security system that sensitive has a boatload of advantages, especially when it comes to financing. Auditors will be able to easily determine any kind of suspicious activity the moment it happens. People looking to embezzle funds will not be able even to try to dodge or alter records. Moreover, the blockchain makes it faster easier to track criminal activity, especially with private blockchains.

Secure and Transparent

The key characteristic that makes blockchain, so groundbreaking is its airtight security despite its high levels of transparency. Simply put, anyone can access it, but no one can break into the blockchain. A prime example would be Bitcoin. Sure, Bitcoin has had its fair share of scandals, but almost all of them have been about people using the crypto-coin for illicit activities. Not once has Bitcoin been hacked despite its soaring popularity.

This is because the blockchain technology makes it impossible for anyone to hack into the network. Users have easy access to their data without ever compromising on security. And in this highly digitized age where everything of importance is either online or slowly moving online, security and user privacy is more crucial than ever. One malicious hacker could potentially ruin a person’s life. But with the blockchain, you and your private information are guaranteed high-end security. Fraudulent activities are rendered an impossibility with blockchain technology.

Better still, the blockchain offers users high transparency so you can keep an eye out on your accounts if you are particularly paranoid. You will be able to note any suspicious changes or activities and take immediate action.

Faster, More Efficient

Lastly, blockchain generally processes transactions faster than other server systems. For instance, in the case of transferring funds, because a blockchain doesn’t require an intermediary, the process is faster and more direct. You will be able to save time significantly.

With blockchain technology, there will be a reduced waiting period, especially in international bank transfers. There is also no business hours in a blockchain (unlike in traditional banks) so users can directly send funds to other users in any time of the day.

Challenges Inherent to Banks and Traditional Financial Services

The primary reason why cryptocurrency was conceptualized was that proponents saw that there were too many flaws in financial institutions. Even now with the advancement of technology, banks suffer from some inefficiencies that drive more and more people away. To name a few:

Centralized banking service is fundamentally reliant on a centralized architecture. If the central server is ever compromised, all services throughout the country (maybe even outside the country) will be affected. The bank will be forced to a standstill until the server is fixed or undergoes maintenance. A sudden halt will be inconvenient to patrons, especially if there is an emergency.

Opening a new bank account is time-consuming and costs money. Registering a new account is not a simple process, especially in developing countries.

Transferring money from one account to another takes time and requires you to pay transaction fees. Depending on how much money you are sending, the fee can be unnoticeable or significant. Banks also typically have a limit to how much you can send on a single day.

Banks require a significant amount of funds and services to maintain. The large library of application code for security and authentication services is incredibly costly. There is also the actual building to keep in shape, the personnel to train and pay, the security detail to set up.

Banks worldwide have strict operating hours. Because a bank is a physical institution, of course, its operating hours are limited. This can be a huge inconvenience to people who are too busy with work to go to the bank in the middle of the day. Moreover, even if you only have a minor transaction to make, it could take you hours to process your transaction because of the number of people on queue.

How Blockchain Technology can Disrupt the Finance Market

Now that we have established the characteristics of blockchain and the flaws in the traditional financial system, it should not be that difficult to understand how blockchain technology can easily disrupt the finance market. After all, blockchain is designed specifically to eliminate the need for third parties (such as banks) when transacting finances.

It is no surprise then that a few financial institutions have planned several steps and have started experimenting with blockchain-based applications for their services. These institutions aim to automate and simplify their processes with blockchain, though things are still in the experimental stage. It is too early to tell whether banks or other financial institutions can successfully merge the traditional system with blockchain tech.

For now, let us discuss how blockchain can affect the traditional financial system. To be sure,blockchain can alter all areas of banking like:

Payments services

Unsurprisingly, blockchain is disrupting this area the most since cryptocurrencies – the initial application for blockchain technology – was developed to solve the trouble with the conventional cash system. By allowing consumers to no longer require a third party financial entity to oversee transactions, exchanging money from around the globe is faster and less expensive.

Say if you live in a whole different continent, you will need to pay a flat fee for the wire, transaction fees for your bank, transaction fees for the receiving bank, and other hidden fees. And take note that the bank’s cut is higher the larger the amount of money. Just imagine how much money it takes people to move their own money from one bank to another. It is quite ludicrous how much money is wasted on money transfers and how banks have been getting away with it for so long because there has not been any feasible alternative.

It is no secret that our current financial system is severely outdated and incredibly flawed. Last year alone, an estimated $250 trillion in international payments were reportedly transacted worldwide. With those trillions, banks have received around $200 billion in revenue from processing the transfers. And not only is transferring money expensive, but it also takes a long time to complete too. International money transfers typically require about three to four business days. Holidays and weekends further delay the transfers so it could take more than a week for the transfer to be fully settled.

Blockchain offers consumers the opportunity to send money to clients and loved ones around the world faster, cheaper, and easier. The blockchain system has higher security that comes at a lower cost too which is a bonus. Crypto coins like Bitcoin and altcoins work in a public and decentralized digital ledger so just about anyone can use it to send and receive money any time without a central authority constantly verifying (and charging for) transactions.

Moreover, cryptocurrency transactions can take up half an hour to sixteen hours to be completed. Perhaps it might not be the instant appeal people were promised but it is still much better than waiting a minimum of three days.

Savings and Deposits

As mentioned in the previous section, one of the challenges in our current financial system is the difficulty and inconvenience of creating a new account in a bank. The process takes up a lot of time since you will have to fill out forms and such. Our financial infrastructure is simply too complicated and, at times, convoluted for the sake of security.

However, with blockchain technology, you can hold your savings (converted to cryptocurrencies) in a digital wallet. And setting up a digital wallet is a lot easier than a bank account. The process is simple and straightforward. Not only will you be able to store your coins safely and securely in your digital wallet, but you also will not have to worry about keeping your account active.

Blockchains can significantly reduce a bank’s operational costs should they integrate it into their system. Us consumers will also be much closer to real-time transactions between financial institutions. No more bypassing complicated system of intermediaries for what should be quick and easy transactions. You will not have to deal with high transaction fees too since the blockchain does not need an outside party to oversee and process your activities.

Loans and Credit

The way our current banking system is built, taking out a loan can be quite difficult if you do not have a good credit report. This basis of granting loans is undoubtedly inaccurate, unreliable, and vulnerable. Even in most highly developed countries, consumers are aware of how troublesome getting a bank loan can be if you do not have the right background.

Banks have to ensure that people can pay back the loan, so they have to do a thorough risk evaluation. Applicants for a loan have to reveal information such as their credit score, their income, and home ownership status. Unfortunately, this kind of system is mostly hostile and untrusting to consumers since banks refuse to take any risks in lending money. However, it has been determined that a huge percentage of loan applicants are denied their requests for a loan because of material error in their credit score.

A distributed system for loans based on blockchain technology, on the other hand, is not only decentralized but also resistant to bankruptcy since no single organization or entity have full control of the deposits.

Furthermore, alternative blockchain tech lending is cheaper, more secure, and more efficient in granting personal loans to a broader pool of clients. And since the registry for historical payments is cryptographically secure, consumers can easily apply for loans based on a global credit score.


One of the biggest challenges entrepreneurs face is raising money through venture capital. It is a long and complicated process that involves a lot of meetings, negotiations, and rejections.

With blockchain, raising money is much easier since you do not need a platform or venture capitalists. Enduring long meetings and negotiations are not necessary either. On the blockchain, you can raise funds in the form of an initial coin offering (ICO). A certain project sells coins or tokens in exchange for cryptocurrencies. Theoretically, the token is valued based on the success of its implementation in the future.

The great thing about this method is that anyone anywhere is free to raise money for a project and anyone can invest in projects they believe in. ICOs would allow companies or entities are utilizing blockchain to sidestep the conventional, arduous fundraising process by selling tokens directly to the public.

There are other benefits of raising funds through ICO too. For instance, since ICOs are done online (and, consequently, globally) companies are exposed to a significantly larger pool of potential investors. Entrepreneurs are not limited to pitching to high net-worth individuals or institutions. Another is companies are given immediate access to liquidity since they are dealing with cryptocurrencies. When you sell a token, it’s immediately priced on a 24-hour global market.

Financial Securities

When you are in the business of buying and selling financial assets like stocks, commodities, futures, etc., it is vital that you can keep track of who owns what. With our current financial market, this is done through a complex chain of brokers, central security depositories, exchanges, custodian banks, and clearinghouses. It should be noted that these different parties were built around paper ownership which is a very outdated system (especially since investing and trading financial instruments is an online venture and do not involve any actual physical paperwork).

Interestingly enough, executing securities transactions electronically is much more complicated than the antiquated certificate of ownership system. Buying and selling assets online would mean relaying your order through a whole bunch of third parties. This makes tracking ownership incredibly difficult since each party would have their copy of the truth in their ledger.

This system is incredibly inefficient and imprecise. Too many parties are involved, and each party charges a fee. Not to mention that transactions have to be manually validated.

With blockchain, the financial market will undergo a total overhaul. The overly complicated system will be replaced with a decentralized database of unique digital assets. Transferring ownership of an asset through cryptographic tokens will be possible with a distributed ledger.

Currently, blockchain companies are developing a way to tokenize real-world financial assets (like stocks and real estate). Bitcoin and Ethereum have already managed to do this but only with purely digital assets (cryptocurrencies).

Blockchain technology can seriously disrupt the exchange of financial securities. It has the potential to cut out the need for all those middlemen and drastically reduce exchange fees.


Right now, there are countless blockchain projects in the works, some we may not even be able to imagine. It is going to take some time for anyone to be able to say for sure that blockchain technology is truly meant for mainstream use. For one thing, the general public may not warm up to this new revolutionary technology. Another, there are still some significant kinks that developers are dealing with which could mean that we might not see blockchain-based mainstream apps in a few years time.

Whatever the case, when it comes to the financial market, the blockchain is bound to disrupt our traditional and outdated system entirely. It was designed to do that much, anyway. Banks and financial entities can either embrace this marvelous innovation and take part in the future of the financial market, or they could keep refusing to change and resist this technological revolution.