The digital era transformed forever the financial ecosystem, once the world of finance was slapped by a huge revolution.

Moved by a blockchain system, transactions became faster, information remained more secure, financial markets started to include new players globally, and smart contracts increased speed, efficiency, accuracy, trust, and transparency between all the parts involved.

Blockchain is digital information stored in a public database, and consists, in most cases, of cryptocurrencies. With this technology, banks and financial institutions can store information transactions related, such as date, time, and price.

Let’s unravel the essence of blockchain fintech, a decentralized technology that changed the image that we have of currencies and financial service solutions!

Understanding Blockchain Fintech

Blockchain allows transactions and secures records across multiple computers. It operates on a peer-to-peer network, without intermediaries; a system that doesn’t compromise transparency, security, or immutability.  This technology gained prominence in 2009, after the introduction of Bitcoin, serving as an underlying infrastructure.

Blockchain has played a crucial role in the affirmation and advancement of fintech. Firstly, blockchain implies advanced cryptographic techniques, making it highly secure, and the immutability of the ledger ensures that once a transaction is recorded, it never can be changed.

Additionally, smart contracts, a strong benefit of this architecture, have become one of the best friends of financial experts, because of their range of possibilities. Those invaluable tools contribute to the efficiency and effectiveness of financial operations. Smart contracts are typically used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. They can also automate a workflow, triggering the next action when predetermined conditions are met.

 

Blockchain in the 90s

Scott Stornetta is known as one of the fathers of blockchain. He had the idea of a time-linked chain as a solution to the problem of authenticating documents. In the early 1990s, Stornetta, with his colleague, Stuart Haber, proposed a system for timestamping digital documents to ensure their immutability and integrity.

This work laid the foundation for the creation of a secure digital ledger. The idea was to build a chain of blocks, each containing a cryptographic hash of the previous block, to form a chain of linked and time-stamped records.

 Although Stornetta and Haber didn’t implement a complete blockchain system or create a cryptocurrency, their research and concepts influenced the development of blockchain technology. This work inspired the creation of Bitcoin’s blockchain by Satoshi Nakamoto, in 2008.

 

What is Timestamping?

Every human has a specific fingerprint. It happens the same with every single blockchain, that stores a small piece of data.

Timestamps are like writing anything on a block that leaves a trace, containing a particular date corresponding to its parent block, through a signature: that data is fixed and immutable.

Tokenisation of Assets: A Paradigm Shift

Tokenisation has redefined the concept of ownership and investment. Imagine a world where real estate isn’t confined to an elite, where fine art becomes a shared passion accessible to all, and where investment opportunities are not bound by geographical constraints.

This concept has emerged and contributed to redefining the way we perceive and manage assets. Tokenisation involves a different form of ownership or stake within real-world assets through digital tokens on a blockchain.

Let’s understand what rewriting the rules of ownership means and the consequent democratization of asset access influenced by blockchain fintech.

In the traditional world of ownership, real estate assets or fin art were often confined within rigid frameworks – these assets were considered relatively illiquid. Meaning their value couldn’t be easily unlocked or traded. The barriers to entry were high, limiting participation to a select group of individuals or institutional investors with substantial financial means.

However, with the entrance of blockchain fintech and tokenisation, it became possible for investors to buy and sell smaller portions of high-value assets. As enhanced before, blockchain-based smart contracts automate many processes, reducing the time and costs associated with traditional trades.

In the world of tokenisation, assets are no longer indivisible entities. Fractional ownership allows individuals to purchase and trade smaller portions of high-value assets, unlocking liquidity and diversifying investment possibilities.

Living in the Era of Blockchain Fintech: Financial Inclusion

  The accessibility of financial services has increased, and the speed of transactions has significantly improved, contributing to a more interconnected and efficient global financial environment.

One of the most undeniable fintech progresses of this century is the possibility of facilitating faster and more cost-effective cross-border transactions. Traditional international transfers were, many times, time-consuming and expensive due to multiple intermediaries; blockchain streamlines this process.

Living inside a fintech unstoppable reality could mean a massive integration of new players within the financial system, more transactions, and liquidity in the economy. Some players may contribute to changes and innovations. Let’s look into some examples.

Fintech Startups

Newly established companies that leverage technology to provide creative financial services, such as mobile payment platforms or robot advisors.

Traditional Fintech Institutions and Tech Giants

Established big institutions and banks that use fintech solutions to improve their edge in the market and be more competitive. Major technology companies like Amazon, Google, or Apple will be able to offer different and innovative payment methods or digital wallets.

Blockchain and Cryptocurrency Projects

Companies working on blockchain technology and cryptocurrencies will contribute to the evolution of financial systems, providing decentralized solutions for transactions and smart contracts.

Investors and Venture Capitalists

Initial Coin Offering (ICO), the traditional, and equivalent, Initial Public Offering (IPO), it’s just an example of numerous tools to include more investors and traders, with less capital, in the financial game. ICO opens investment opportunities to more players, such as retail investors to participate in early-stage projects.

Consumers

Individuals and businesses adopting fintech solutions and driving demand for new and improved financial services are essential players shaping the industry.

As the fintech speedy environment continues to evolve, staying aware of key trends and identifying what players are entering the industry is capital for individuals and institutions alike.

Will fintech and blockchain replace traditional financial institutions?

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