Today, everyone seems to be “into” Blockchain and the next hype cycle will centre on blockchain! But what is blockchain and, where is it applicable?
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The blockchain is often considered synonymous with Cryptocurrency, while its applicability is perceived to be limited to financial transactions. And, Trade Finance is considered the largest prospect for the same.
However, I am sure we all understand that Blockchain has more to it! Although it is a simple concept, its implications are immense.
In fact, some ministries are considering leveraging blockchain for purposes like Land records validation et al. For example, UAE has a blockchain vision and strategy 2021 for validating and authenticating transactions. The state of New York has offered a ‘BitLicense’, which allows businesses to conduct virtual currency activities on a DLT-infrastructure (Distributed Ledger Technology or blockchain). The Australian government, too, has offered start-ups the facilities to further develop their blockchain initiatives. Similarly, in India, the technology is being adopted at commercial banks and research institutions. These institutions have undertaken DLT–based solutions for trade finance and cross-border remittance.
To understand this further, let’s take the example of the KYC process. Almost all organisations invest millions in Tele and Field Verification to get the KYC right. However, this process can easily be converted into a blockchain.
Thus, the concept of KYC will be revolutionised with the use of blockchain. With blockchain, the customer will be able to upload the required documents for his identity and address to a central site and the hash algorithms will be generated for securely archiving it.
The bank that wants to onboard this customer will then send a request to the central nodal agency for the documents. Along with the documents, the entire block of verifications and validations will be sent to the bank. With each validation, in multiple domains and agencies, the chain will get stronger and authentication addressed.
The solution will eliminate issues with the current approach to KYC and provide the following stack of features:
An immutable and secure database for maintaining integrity, accessibility and accountability
Permission-based access to information, which will allow data to be available only to accredited organizations
Reduced cost of processing with automation
Streamlined processes enabling clients to consign more quickly into banks, companies etc.
Reduce the risks of fraud and operational errors
Thus, Blockchain holds tremendous potential for disruption. In the coming years, it can be used to create new business models, reduce risks and revolutionize compliance. However, large-scale adoption will require time as the technology is still being tested and use cases are being implemented gradually, on a small scale. The blockchain disruption is underway, and it is incumbent on us to seize it.