Use case of block chain unit 4 AKTU

Use case of block chain unit 4 AKTU

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  Unit4 Applications of Blockchainin Finance The Ethereum blockchain enables more open, secure business networks, shared operating models, more efficient processes, reduced costs and services in banking and finance. It enables digital securities to be issued within shorter periods of time, at lower unit costs, with greater levels of customization. Over the last five years, the technology has matured for enterprise-grade use demonstrating the following benefits: Security: Its distributed consensus based architecture eliminates single points of failure and reduces the need for data intermediaries such as transfer agents, messaging system operators and inefficient monopolistic utilities. Ethereum also enables implementation of secure application code designed to be tamper-proof against fraud and malicious third parties Trust: Its transparent and immutable ledger makes it easy for different parties in a business network to collaborate, manage data, and reach agreements Programmability: It supports the creation and execution of smart contracts— tamper proof, deterministic software that automates business logic – creating increased trust and efficiency Privacy: It provides market-leading tools for granular data privacy across every layer of the software stack, allowing selective sharing of data in business networks.  High-Performance: It’s private and hybrid networks are engineered to sustain hundreds of transactions per second and periodic surges in network activity  Scalability: It supports interoperability between private and public chains, offering each enterprise solution the global reach, tremendous resilience, and high integrity of the mainnet
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  Fraud Reduction  Theinvolvement of money in any situation leads to increased chances of fraudulent activities. And for an overall sector operating on the very base model of money, security is of utmost importance.  More than 40% of financial bodies and intermediaries including money transfer service providers as well as stock exchanges are susceptible to heavy losses relating to economic crimes annually.  Reason being the usage of centralized database systems for operations and money management. A centralized database system is vulnerable(possibility of being attacked ) and highly prone to cyber attacks as the single point of failure, such systems can be exploited by hackers.  Once a hacker gets access to such a system, it is a child’s play for him/her to take the money. This leads to the need for more secure systems that are strong enough to avoid such attacks.  Enter Blockchain, a secure, non-corruptible technology operating on a distributed database system. Since blockchain is distributed, there is no chance of a single point of failure. Each transaction is stored in the form of a block with a cryptographic mechanism which is extremely difficult to corrupt.  Moreover, all the blocks are linked to each other and due to this linking mechanism, if one block is breached all the other blocks on the blockchain immediately showcase the change. This, in turn, helps to track the breach and provides the hacker with no time to make changes in the overall system. Smart Contracts  A smart contract is a self-executable piece of code that runs when certain conditions written on it are completed.  The application of smart contracts can prove particularly important in the banking and finance sector.  Smart contracts, when used for financial transactions, would be helpful in increasing the speed and simplifying complex processes.  This will also ensure the transfer of accurate information as the transaction will be approved only if all the written conditions of the code are met.  as these terms are visible to all the parties involved in the transactions, the chances of error at the time of execution are dropped drastically. CLEARING & SETTLEMENT? Clearing is the process of updating the accounts of the trading parties and arranging for the transfer of money and securities. Settlement is the actual exchange of money, or some other value, for the securities.
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  Satoshi Nakamoto designedBitcoin blockchain as a distributed ledger for recording the transactions and transfer of coin tokens between interconnected network. Many business enterprises and entrepreneurs use this concept as a platform for their financial transactions. In the shorter term, clearing and settlement is proving to be the most active use case area for blockchain in banking, mainly because it gives a short-term win with real cost savings. Clearing and settlement costs billions and, according to Santander’s 2015 report LINK, it is estimated that moving this into a digital record, near real-time and over the internet, will save the industry $20 billion a year in more in overhead costs due to D+3. Why Is Blockchain a Good Solution for KYC Verification? Identity can be easily established by government-issued documents such as driver‘s licenses, social security cards or passports etc. However, a major challenge lies in establishing the authentication of other identification sources. Also, flaws in the security of such systems has led to repeated instances of financial fraud and money laundering etc Banksand financial institutionsare strictlyconcernedaboutthe increasingcoststhattheyhave to bearin orderto complywithAML and KYC i.e.Anti-moneyLaunderingandKnow YourCustomer norms.All these processesconsumealotof time and have to be performedindividuallybyall the banksand moneybasedinstitutions. THE WINDS OF CHANGE – KYC BLOCKCHAIN A decentralized computing architecture, blockchain will allow for the accumulation of data from multiple authoritative service providers into a single immutable, cryptographically secured and validated database.
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  KYC verification usingblockchain has the potential to be faster, easier, safer and more efficient than the traditional verification procedures. WHAT IS KYC BLOCKCHAIN? Blockchaintechnologyallowsforthe creationof adistributedledgerthatisthensharedtoall users on the network.Thisfactormeansthat there isno one single authorityandtherefore apointof weakness,asinthe client/servermodel. Here‘s how a KYC Blockchain application would work. An institution, a bank, for example, sends a request to the blockchain platform to access your identity data. In thisnewarchitecture,dataaccesswouldbe solelybasedonuserconsent.Tograntconsent,a user onlyhas to login,probablythrougha One Time Password(OTP) andallocate aprivate keytothe data. Althoughthe datacan nowbe accessedbya thirdparty (the bankin thisinstance),ownership of the data remainswiththe user. The concept of the Blockchain-basedKYCplatformisalreadybeingimplementedbyITgiantslike IBM. The SharedCorporate KnowYourCustomer(KYC) projectassuresanefficient,secure and decentralizedmechanismtovalidate,collect,store,refreshandshare KYCinformationfor customers. Capital Market: capital markets firms already have the next level of disruption within their sights and many of the traditional challenges could well be addressed by the technology behind bitcoin. The basic functions of blockchain are: a) Decentralized storage of the transaction/asset data across all participants b) Immutability of data stored due to hashing principles
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  c) Smart contractswhich can execute transactions / actions based on business rules The benefits and impact of Blockchain could be far-reaching in capital markets across buy side Use case of blockchain : Real-Time Trade Settlements which monitors the positions of various financial instruments on a real-time basis. clearinghouses act as intermediaries and absorb this default risk In a blockchain system, once a trade is executed on an exchange, the trade details are passed to a smart contract maintained on a permissioned network. The smart contract syncs up with the ledger positions of the instruments maintained on blockchain and does a real-time check on the availability of the traded instruments
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  Tri-Party Collateral Management Financialinstitutions engage tri-party agents to manage their collateral and counterparty exposure. In a blockchain-based collateral management solution, the allocation logic is coded on a smart contract. This contract will have rules primarily pertaining to regulatory mechanisms . The smart contract will interact with the long boxes and the segregated account positions and complete the allocation. . The allocated collateral positions are maintained on a distributed ledger in a real-time basis that will be viewed by parties and regulators Blockchain for Insurance It iscommon forbrokersto call up people andconvince themtotake upa policy. The approach isto make a papercontract whichmeansthe inclusionof humanserrorsduringthe draft or whenclaimingthe insurance.All-in-all,itall makesthingscomplexforall the partiesinthe pipelineincludingthe insurers,brokers,andconsumers.We alsoneedtotake intoconsiderationthe riskassociatedwiththe whole process. (A Proof of Concept (POC) is used to demonstrate the feasibility and practical potential of any blockchain project in any field such as Energy, Communication, Services,) Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired,
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  Fraud Detection Prevention theinsurance industry suffers from 80$ billion per year. Both the insurance companies and the end users suffer due to fraud. On average, a family can lose anywhere from $400 to $700 per year. Most of the time, a visibility issue occurs when information is sent between peers including the insurers, reinsurers and the claimers. The paperwork also enables criminals or fraudsters to modify the information and hence make frauds Blockchain can solve the fraud problem thanks to the transparency it has to offer. Better coordination between insurers means that fraud can be combated properly. The distributed ledger ensures that the transactions done on the blockchain are permanent. This means that no data can be modified once written which provides the basis of data security. Claims can now reside on the distributed ledger making it easy for the insurers to verify the information when the time comes. what frauds can be stopped using blockchain? Let’s listthem below. 1. Stopping or reducing counterfeit is the number one benefit with the help of digital certificates.
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  2. Double spendingor booking can be eliminated where clients cannot claim for the accident twice. 3. Removing unregistered sellers and reducing premium. Claims Prevention and Management It takes time for insurers to gather all the required information while verifying or settling an insurance claim. This can lead to problems considering the severity of the claim. Another challenge is to find out the right fullness of the claims. It is common for claimants to forge false documents which can lead to claims that never happened. : Blockchain, when combined with modern technologies, can enable insurers to create a transparent yet capable customer-focused claims model. Blockchain’s distributed nature enables an implementation method which puts both insurer and the claimant in the same network. The insurers or other third-party parties can easily capture information regarding forms, police reports, evidence and soon. Reinsurence : As discussed above, reinsurance suffers heavily from the lack of information flow between organizations. Blockchain technology can help solve the problem by providing a streamlined network for information exchange between the parties. The use of shared ledger is the key here where the necessary information is updated as soon as it becomes available. This means that both the parties, insurers, and reinsurers can connect and share information to settle claims faster. This efficiency can help the industry function more efficiently and hence decrease the operational cost associated with it. The consumers also benefit from it as it reduces the overall cost associated with claims. Blockchain in supplychain : A supply chain is a network chain of suppliers to manufacturer and distribution of any particular product among the end buyer. This overall chain of a network includes several activities, information, people, and resources.
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  Trade finance :
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  Invoice Discounting withBlockchain: Double Financing: As mentioned earlier; on an average of approximately 0.1% to 0.05% of invoices paid are typically duplicate payments. Invoices are easy toduplicate as we have seen that being leveraged in the case of Businessman Vijay Mallya. · Banks not readily giving loans: Because of a massive amount of work involved in checking the legitimacy of each invoice, demoting the scope for duplication and human error. Reducing Popularity: Due to better alternative schemes standing in the financial market, the traditional ID (Invoice Discounting) market is experiencing a reduction in clients.
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  Invoice Discounting onBlockchain: Peer-To-Peer (P2P) invoice finance platforms provide solutions allowing SMEs to get immediate advances on trade receivables, rather than waiting for customers to pay invoices with long remittance terms. This Invoice discounting platform represents sophisticated and structured specialty finance services which automate the whole process from generation of Invoice to paying back the investors. As a result, the economy will heave ahead as whole potential liquidity will become available to the SMEs that need it. · The reliable credit history of IF seekers: Credit history of IF seekers can be stored on the blockchain, which will build trust within investors. · Improved GDP: As soon as potential liquidity becomes available to SMEs, the economy of the country will get availed. · Reduced Fraud: With the advent of the blockchain, there will be no chance of fraud due to its features such as immutability and audibility. · Time-saving: Previously, time involved in approval of invoice to the legitimacy of the invoice was really long but now, the whole process is getting automated. · Better investment: The platform will create competition between the potential investors, thereby enhanced investment.