For data analysis and processing, blockchain is a revolutionary technology that has the potential to combine financial resources efficiently and effectively. Data, rules, and application layers are used to design new financial forms or service models based on client needs to enhance the banking system's overall efficiency and the quality of financial services. As blockchain technology automates and improves the accuracy of customer credit conditions, financial markets may be transformed. Other uses include improving the efficiency of cross-border financial operations, amongst others. In this study, the authors comprehensively scrutinized the structure of blockchain technology and its use in the financial sector. The final section of the chapter included constructive suggestions to help the development of blockchain technology in cryptocurrencies, smart contracts, initial coin offerings, the clearing and settlement of financial market transactions, and the implications of these developments for the governance of publicly traded companies.
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The blockchain technology is based on the cryptocurrency Bitcoin, the concept of which was published in 2008 in an article written under a pseudonym was presented. The underlying concept is to develop a decentralised payment system that is capable of operating without the involvement of “trustworthy third parties,” such as financial institutions such as central and commercial banks (Baldominos Gómez & Mochón, 2020). Despite the fact that cryptocurrencies have not supplanted conventional currencies, they have grown in importance dramatically in recent years.
The total market value of all cryptocurrencies is several hundred billion US dollars, and there are futures contracts and exchange-traded funds that are based on cryptocurrency investments. Smart contracts, among other things, allow for the issuance of “tokens,” which are utilised, for example, in the context of Initial Coin Offerings (ICOs), a new kind of business financing that is becoming more popular (Diaby et al., 2021). Although blockchain technology was originally developed for the purpose of creating cryptocurrencies, its application potential now stretches well beyond this. For example, it is being debated whether or not it has the potential to completely transform the processing of securities transactions. It was also predicted that the changes would have far-reaching consequences for the corporate governance of publicly traded corporations. Also mentioned have been a slew of non-financial uses, which we will not cover in this post.
But there are many who believe the impacts of blockchain technology will be more limited in scope. In order to do away with financial institutions such as central or commercial banks, the Bitcoin concept was developed (Chang et al., 2020). In reality, however, the vast majority of Bitcoin transactions currently take place on stock exchanges (and hence at financial institutions), where Bitcoin and other crypto currencies may be exchanged against one another as well as against regular fiat money, on the other hand, is manifestly in conflict with this.
Attempting to compile a comprehensive inventory of probable financial uses of blockchain technology, we provide our findings in this paper. It is organised in the following manner. First, we will outline the technical basics of the blockchain, beginning with the Bitcoin blockchain as a starting point but moving on to examine alternate design possibilities where it is appropriate (Andoni et al., 2019). After that, in the third part, we show what we believe to be the most significant financial uses of the new technology. The topics we cover most often include cryptocurrency and blockchain technology; smart contracts; initial coin offerings; securities trading; and the corporate governance of publicly traded firms. The fourth part concludes the essay by providing a forecast.