As the time goes by, people on the Internet are more and more interested in learning how Bitcoin and other cryptocurrencies work, as well as in finding out the technology behind them. The technology that enables cryptocurrencies to work is the distributed ledger. Even though it is not necessary to know everything about it, having basic knowledge on the distributed ledger will help you to understand why it is so popular and how it will transform one of the biggest industries in the world.
The technology of distributed ledger is the first type of ledger that works without third parties, such as governments, banks, or some other institutions. This technology enables distributing a ledger to the participants, and the participants have to maintain and validate it. All of the transactions in the distributed ledger are safe, secure and fast, leaving no place for hackers.
One area where distributed ledger has a lot of potential to intervene and transform the whole process is the financial industry. Here are some examples of how will distributed ledger transform the financial industry.
The Internet has enabled us to send everything we want around the world instantly, such as making payments. The distributed ledger provides an easier way of transferring payments through peer-to-peer payments and micro payments. For example, Midchains has developed an online platform for digital asset exchange that makes digital currency trading faster and safer.
The distributed ledger gives us transparency, accountability and ability to trace transactions by ourselves. This will be a great tool for financial organizations to create better programs that will bring benefits to both organizations and clients.
Moreover, the distributed ledger enables executing smart contracts, also known as blockchain contracts or digital contracts. A smart contract is a self-executing contract that enables transactions between two parties without need of a third party. Each transaction is performed through codes. This will transform the way transactions are made in the financial industry, and will save a lot of time. Smart contracts allow exchanging documents, money, shares, everything of value in a simple and easy way.
The distributed ledger can also cut out the brokers and that will lead to cutting out the need for a centralized system. Another important benefit of the distributed ledger is that it allows the users to register only once, and they will be able to use the same identity for each financial service, apart from the today’s process when we need to go through a lot of complicated steps in order to register online for financial services.
Almost 2 billion people don’t have any bank account nowadays, because the financial institutions think that there are risks for some people and they forbid them access to the financial services. This can be easily changed with the distributed ledger. Each person is able to access the distributed ledger and to perform as many transactions as they want.
The distributed ledger is a safe and powerful place created with cryptography techniques. These techniques are not easy to hack. That’s why the distributed ledger is ideal for the financial sector, because the financial sector needs a strong place for secure and fast transactions all over the world.