By now you probably know what blockchain and bitcoin are, the cryptocurrencies that started it all. Beyond speculative investments, it may be less clear to what extent this new technology has had a tangible effect. Impact on the world of financeTraditional banks are beginning to sideline this newcomer who sat at the financial circuit table without prior invitation.
This article will cover:
Application of blockchain to finance
Cryptocurrencies remain in the crossfire with countries like China hindering the mining and trading of this currency, but the underlying blockchain technology is transforming financial markets. Some of the beneficiaries are developing countries.
Below are some examples of impacts that are starting to affect traditional banks.
- Free, Instant, Borderless Payments
- Financial services for people without access to the banking system
- Secure transactions and payments
- Digital Identity Verification in Financial Transactions
- Letters of credit and bills of lading for freight transportation
Blockchain and Fintech: A Paradigm Shift
The rise of blockchain technology goes hand in hand with the growth of the fintech industry, which offers new solutions outside the traditional banking circuit.
As the name suggests, fintech companies Combining financial services with new technologyOne example is the imminent IPO of Stripe, an online payments company that could make bank transfer history. It is currently worth nearly $100 billion.
Another financial sector experiencing this revolution is microcredit. Deferred payment for small purchases with no interestmodality known as BNPL (buy now, pay later).
However, beyond e-commerce, fintech is also making an impact Microcredit sector for people in developing countriesConsidering blockchain technology’s authentication capabilities and the elimination of transaction intermediaries, blockchain A natural ally of the fintech revolution.
For the Marshall Islands
This small archipelago in the Pacific Ocean announced on February 26, 2018 that it would adopt blockchain technology. sovereign currencyreplaces the US dollar.
Named SOV, it marks the country Digital currency pioneerThe first project will launch 24 million SOVs and increase reserves by 4% annually through mining.
To carry out the initiative, they Service of Silvio Micali, Professor at MIT, USA. His startup is responsible for developing the architecture of the yet-to-launch coin.
The leaders of the Marshall Islands believe that this strategy will allow them to international financial circuit A country with a population of less than 60,000. You can watch the presentation video here:
The SOV Foundation website details the advantages of this sovereign currency.
- Easy to use for everyday shopping
- Banks with clear regulations
- fast, cheap and secure transactions
- Value that lasts over time
But it doesn’t look like all is going well for the small Pacific Republic initiative that recently emerged from the tax evasion blacklist. In March 2021, the head of the International Monetary Fund, her Yong Sarah, Zhou, voiced her criticism of SOV. According to Zhou, SOV is Macroeconomic risks and financial stability issuesThese statements are consistent with the IMF’s initial reaction to advising against SOV implementation.
Despite this criticism, other countries such as El Salvador have started accepting cryptocurrencies as legal tender.Only time will tell how much Blockchain will change the financial landscape, but its impact is being felt in more and more areas. Smart contracts, insurance, certificates of art (so-called NTFs), or voting are some of the applications of blockchain in other areas. Not only that, blockchain can be a tool to promote sustainability. As you can read here, blockchain is starting to be implemented in the renewable energy sector.
sauce: SOV, MIT, Wikipedia, Daily, https://www.theverge.com/2018/5/23/17384608/marshall-islands-cryptocurrency-us-dollar-usd-currency
