It’s been over a year and half, somewhere in August 2016 when I (Mr. Nitesh Sharma) attended a seminar in JW Marriott Aerocity Delhi on a startup. Lot of startups attended the seminar sharing their views and their experience of their Journey. It was quite an interesting session but something which gripped my mind then and now, out of which I am still to come out and as I see the future billions of people like me, will get entrapped to this jargon in coming years which I heard for the first time in the seminar “ BLOCKCHAIN”. Unfortunately, the noise has been louder for Bitcoins, which ideally should have been for blockchain, the technology.
As I remember, the panelist includes Rajashehara V Maiya from Edgeverve, the man behind Finacle Blockchain Solution to the bank and I remember the discussion point was how fast banks were adopting blockchain in cross border payment and what the Finacle was developing. After that day I had spent sleepless nights over few months to understand what blockchain is and where it will be used and the merits and demerits. The answer which I have got was, everywhere. It was coming like a storm and would engulf all departments including government and every industry in some way or the other. Something which internet did in the 20th Century, same blockchain will do in next 10 years.
Why I am writing today is probably is because if blockchain technology was used for transactions and accounting, the fraud at state-owned Punjab National Bank (PNB) could have been prevented or at least detected earlier. I understand all banks are trying hard to come out with blockchain solution but since it’s a new concept hence it is bound to take some time before flawless execution.
What is blockchain?
The Blockchain is a digitally distributed ledger system that records an asset’s movement and ensures point-to-point tracking of information on transactions that can map its journey. The fact that it is a distributed ledger, i.e. a decentralized system, makes transacting on blockchain transparent. Decentralization is one of the key aspects of blockchain because no single authority has full control over it, there is no central point of failure and the entire system operates in the state of consensus making the transactions transparent. By storing data across its network, blockchain eliminates the risks that come with data being held centrally.
How blockchain can help
Blockchain can help the financial industry ensure transparent and immutable transactions. What happened at PNB was the result of numerous systemic failures to detect simple human malfeasance. These failures would have been easily spotted and prevented on blockchain. Any changes and alteration would have alerted and would have required vetting by all the members of the blockchain.
A key feature that can help prevent and detect fraud is the smart contract. Smart contract or blockchain contract or digital contract, in case of banking, is a program capable of digitally facilitating, verifying or enforcing the negotiation or performance of a contract.
In a private permission blockchain it will be real-time access to transactions, making it relatively easy to identify any attempted fraud. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.
The way forward
A few banks in India have already started testing the waters with blockchain. These include ICICI Bank and Yes bank among the front runners who have already implemented blockchain.
The Indian government is also planning on implementing blockchain technology across various sector. Finance Minister Arun Jaitley in his budget speech said, “The government will explore the use of block chain technology proactively for ushering in the digital economy.” For instance, Niti Aayog, the government’s premier think tank, is looking to bring out a discussion paper on the prospective use of blockchain technology in areas such as land records and electronic health records. . Also, blockchain can make transactions faster, cheaper, and bring down the cost of services. The technology will find its place in KYC, Banking, healthcare, Insurance, Shipping, telecommunication and even defense.
In context to our forex business we see wide acceptability of this technology in trade finance where multiple documents shake hand among the global banks which can be replaced through blockchain and even where the settlement time is more than 24 hours, it can become live. Lot of corporate clients will benefit out of the delay in discounting process from blockchain.Bajaj Electricals is one such example where by implementing blockchain, company has been able to reduce the 5 days process of discounting to just few minutes. This technology will find its use and many such sectors thereby bringing the biggest revolution of decades to come.
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