{"id":4097,"date":"2020-01-10T09:26:15","date_gmt":"2020-01-10T08:26:15","guid":{"rendered":"https:\/\/www.alvantia.com\/?p=4097"},"modified":"2020-01-10T09:26:16","modified_gmt":"2020-01-10T08:26:16","slug":"blockchain-technology-and-dlt-in-the-financial-sector","status":"publish","type":"post","link":"https:\/\/www.alvantia.com\/en\/blockchain-technology-and-dlt-in-the-financial-sector\/","title":{"rendered":"Blockchain Technology and DLT in the financial sector"},"content":{"rendered":"\n

It\u2019s a fact that there are new technological trends that are\ncurrently revolutionising the financial markets. The term Blockchain<\/strong> has\nbecome an everyday word in practically everyone\u2019s vocabulary, as it refers to\nthe technology being used by the banking sector to reinvent itself.<\/p>\n\n\n\n\n\n\n\n

The emergence of cryptocurrencies has been one of the principal\ndriving forces behind the increasing popularity of such profound concepts\nas Distributed Ledger Technology<\/strong> (DLT)<\/em>.<\/p>\n\n\n\n

A common misconception is that DLT and Blockchain are one and\nthe same. In spite of being created under the same concept, they are different\ntechnologies with very particular characteristics. Understanding them is\nsimpler than you would think.<\/p>\n\n\n\n

Distributed ledger technology is defined as a database that is\npresent, or as its name suggests, distributed over several locations or among\nvarious participants. Some authors consider DLT to be any system in which\ninformation travelling over the network is shared and consumed by all\nparticipating members. This technology, which is considered decentralised,\noffers the capacity to connect computers located anywhere in the world, forming\na shared network of data managed by the participants, without the need for\nthird-party management.<\/p>\n\n\n\n

On the other hand, Blockchain is a non-relational shared\ndatabase where the inputs must be validated and encrypted. It represents an\naccounting ledger where all the transactions are recorded using asymmetric\ncryptography or hash functions. The information<\/strong> that travels through this structure is grouped into blocks<\/strong>; each one contains information on the other blocks in the\nchain, in such a way that when the data in one of these blocks is changed, it\nalters the information in the rest of the chain\u2019s blocks. Thus, the immutability of the data is guaranteed, forming a distributed\nand decentralised network.<\/strong><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

As mentioned above, there are notable similarities between both\nconcepts. So what is the difference between these two technologies then? It\u2019s\nvery simple: Blockchain is just\na specific form of DLT<\/strong>. However, not all DLTs\nare Blockchain, as there are other technologies based on distributed\naccounting.<\/p>\n\n\n\n

A more notable difference is the level of decentralisation of\nBlockchain. This technology does not implement any figure to act as an\nintermediary for the transactions, rather it is the actual members of the\nnetwork that decide on them. On the other hand, although the activity of a DLT\nis independent, its structure requires a necessary figure to determine the\nconditions governing it, therefore some authors consider it to be\npseudo-decentralised. Moreover, the grouping of information in a chain is very\ncharacteristic of Blockchain.<\/p>\n\n\n\n

Undoubtedly, both technologies have features that make them\ninnovative and appealing on the current market, each one offering possibilities\nto be applied in diverse sectors.<\/p>\n\n\n\n

What do these\ntechnologies offer the banking sector?<\/strong><\/h4>\n\n\n\n

In the case of banking, the use of these technologies is highly\nattractive as they offer the capacity\nto authenticate, distribute, track and protect data more efficiently<\/strong>. In fact, the use of DLT in banking entities has enabled\ninternational transfers to be carried out in real time, as well as a greater\ncohesion between providers and customers. But the benefits are even greater.<\/p>\n\n\n\n

There are increasingly more financed projects based on\nBlockchain in the banking sector, and because it is a system that isn\u2019t based\non centralisation and doesn\u2019t have any authority that acts as an arbitrator,\nits functioning has an increased transparency, therefore any type of fraud is made more difficult<\/strong>. Hence the reason that they are capable of improving\nefficiency and changing the way activities in this sector are developed.<\/p>\n\n\n\n

Therefore, these technologies have provided very clear\nadvantages in sending times, paper and cost conciliation saving; improving the\nefficiency of the systems, permitting the automation of record maintenance,\nsimplifying processes that with other technologies could be much more complex\nand making them a lot less vulnerable to human error.<\/p>\n\n\n\n

In fact, the development of Blockchain based systems has\npermitted finding solutions<\/strong> that weren\u2019t possible\nwith the use of conventional practices<\/strong>. As is the case with billing as a method of inter-banking fraud\nprevention, presently allowing any user to access a data history and check if\nthey have been modified, thus increasing process security.<\/p>\n\n\n\n

They even enhance the processes of commercial financing,\nidentity verification and loan management, and, as they are not controlled by\ninternational legal systems, they have revolutionised the banking industry and\nestablished new, more innovative business models. <\/p>\n\n\n\n

But that\u2019s not all. Convinced that digital money is the key to\nthe future, banking institutions have also ventured into the creation of\nvirtual currencies backed by real currencies constructed as tokens, with the\naim of converting them into digital liquidation assets.<\/p>\n\n\n\n

In fact, there are already entities working to make sure these\ndigital currencies comply with all central banking regulations, in such a way\nthat they have strong support to ensure their value does not depend on the use\nthat users themselves give them, but on the support given by these central\nbanking institutions.<\/p>\n\n\n\n

This is why more and more financial entities are foraying into\nthis world and using these tools, with the intention that it will foster their\noperations and lower their costs, acquiring greater agility and accuracy in\ntheir processes and increasing their security.<\/p>\n\n\n\n

Despite the fact that these technologies and their applications\nare still in their initial phase in the banking sector, they have permitted the\nrealisation of operations that were previously inconceivable, and have enabled\nthe financial market to reinvent itself every day to meet users\u2019 current needs.\nThey are, without a doubt, technologies that we should keep in our sight, given\nthat their future looks very bright.<\/p>\n

<\/div>","protected":false},"excerpt":{"rendered":"

It\u2019s a fact that there are new technological trends that are currently revolutionising the financial markets. The term Blockchain has become an everyday word in practically everyone\u2019s vocabulary, as it refers to the technology being used by the banking sector to reinvent itself.<\/p>\n

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