Most people have misunderstood the true meaning of blockchain, or bitcoin in that case. Some perceive it as a bubble or a get rich quick scheme where they can sell a token 100x what they paid. A few understand the true nature and potential of blockchain technology.
Before we delve further, it’s crucial we define blockchain to correct some of these misconceptions.
What Is Blockchain?
Blockchain is a continuously increasing record of transactions. These records, better known as blocks connect through cryptography. The system itself stands on the pillars of decentralization, distribution, and immutability. The original idea of blockchain also meant for the system to be public, but this is changing with the emergence of private blockchains.
The blockchain system also enables users to verify and audit transactions inexpensively and independently. Continuous research is still being carried out on the system features, but users are already enjoying the benefits of increased security and speed.
When it comes to industrial applications of blockchain technology, it is a hot pie. Many corporations are fighting to have the technology implemented in their systems to enable transparency. Banking and finance industry are especially hungry for the technology to be effected to their registries. Some of the areas that the technology finds essential use is in the stock exchange, remittances, payments, financial markets trading, credit reporting, trade finance, lending, and investment management.
Blockchain And Smart Cards
Electronic authorization devices (also known as chip cards and integrated circuit cards in some circles) are essential for gaining access and controlling resources. They have chips embedded with data that machines and devices can read. They also perform various functions.
A vast amount of data can be stored on the chips to enable functions like payment, identity verification, access control, etc. Microprocessors in the smart cards allow the computing function of complex transactions. Most importantly, they are suitable for blockchain applications in banking.
Activities such as account opening, withdrawal, transfer, loan and repayments, and trade finance have been made more efficient by having the smart card blockchain empowered. Collaboratively, blockchain and smart card technology can significantly improve banking services.
Here are some of the ways smart card and blockchain technology can be deployed in banking.
In Asset Registry
A smart card and blockchain bond can effectively better asset registry. The system result can prove efficient and convenient for banks and trust companies. The fact that blockchain is immutable guarantees security as well.
The regular software and spreadsheets for recording asset ownership can be replaced by encoding the smartcards issued to customers. When the user sells their asset, the new owner can be automatically updated in the new system and to the new owner’s card. This extraordinary use can be applied to land titling and registry system, retail inventory tracking and system ownership.
KYC and AML Protocols
The anti-money laundering and know your customer protocols are already in place for banks. The protocols handle some of the most severe challenges faced by financial institutions. The prevention of money laundering and verifying customer identity can be quite a task in a society that is actively looking for loopholes in current systems. Blockchain together with smart card technology comes in handy assisting government agencies to curb money launderers and prevent the same.
Retail Payments And Interbank Transfers
Some banks have already facilitated payment in bitcoin and Ethereum to their retail customers.
Interbank transfers can also be made convenient and efficient through blockchain. It even lowers the costs incurred doing the same by eliminating the intermediaries.
In the end, there is a myriad of benefits of the synchronization of blockchain and smartcard technology. Additional benefits include the trade settlement value among others not mentioned in this piece.