MINI PROJECT REPORT

Submitted in partial fulfillment of Master of Business

Administration Session-2022-2023

“Role of Blockchain in finance Sector”

Faculty Guide Submitted By:

[Mr. Prashant Dwivedi] [Aryan Raj Singh]

[Master of Business Administration] [Roll No.2211310700016]

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DECLARATION

I hereby declare that this submission is my own work. It contains no material

previously published or written by another person, nor has this material to a

substantial extent been accepted for the award of any other degree or diploma

of the university or other institute of higher learning.

(Aryan Raj Singh)

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Date:…15/JULY/2023…………

CERTIFICATE

This is to certify that Mr. /Ms. ARYAN RAJ SINGH

Roll No. 2211310700016 Student of MBA Second Semester (Session 2022-

2023) has successfully completed his/her Mini Project II (KMBN-252) titled

ROLE OF BLOCKCHAIN TECHNOLOGY IN FINANCE INDUSTRY

The work is original and carried out under the guidance & supervision of the project guide.

We wish him/her all the success and good luck for a bright future.

HOD, MBA Project Guide

ALLENHOUSE INSTITUTE OF
MANAGEMENT,KANPUR
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ACKNOWLEDGEMENT

Mini Project Report is one of the important parts of the MBA program, which has helped me

to gain a lot of experience, which will be beneficial in my succeeding career. For this with an

ineffable sense of gratitude I take this opportunity to express my deep sense of indebtedness

and gratitude to Dr. Bhagwan Jagwani, Director - Allenhouse Institute of Management and

Mr. Saurabh Shukla HOD , MBA, for their encouragement, support and guidance in carrying

out the project.

I am very much thankful to my Project Guide [ Mr. Prashant Dwivedi ], MBA Department

for her interest, constructive criticism, persistent encouragement and untiring guidance

throughout the development of the project. It has been my great privilege to work under his

inspiring guidance.

I am also thankful to my parents and my friends for their indelible co-operation for achieving

the goals of this study.

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EXECUTIVE SUMMARY

Blockchain technology is a core, underlying technology with promising application

prospects in the finance sector. On one hand, the industry in China is facing the impact of
interest rate liberalization and profit decline caused by the narrowing interest-rate spread. On
the other hand, it is also affected by economic transformation, Internet development, and
financial innovations. Hence, the finance industry requires urgent transformation and is seeking
new growth avenues. As such, blockchains could revolutionize the underlying technology of the
payment clearing and credit information systems in the finance sector like in banking , thus
upgrading and transforming them. Blockchain applications also promote the formation of
“multi-center, weakly intermediated” scenarios, which will enhance the efficiency of the finance
industry. However, despite the permissionless and self-governing nature of blockchains, the
regulation and actual implementation of a decentralized system are problems that remain to be
resolved. Therefore, we propose the urgent establishment of a “regulatory sandbox” and the
development of industry standards.

With the continuous development and application of blockchain technology, the academic and
commercial circles are constantly exploring the research directions and practical applications of
blockchains. Today, in the financial, sales, medical and other fields, the blockchain has already
played its advantages. In this paper, we focus on the related research and applications of
blockchain technology in the field of intellectual property, analyze the academic research and
commercial application in this direction, and try to provide a new feasible direction for the
research and development of the blockchain in the next stage.
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TABLE OF CONTENT

PART- A
● Declaration………………………………………………….ii
● Certificate……………………………………………………iii
● Acknowledgement……………………………………………iv
● Executive Summary…………………………………………..v

PART-B

● CHAPTER-1(INDUSTRY PROFILE)
● CHAPTER-2(LITERATURE REVIEW)
● CHAPTER-3-i. Emerging Technologies in the selected Industry
ii. Industry Analysis(PESTLE analysis)
● CHAPTER-4 Conclusion
● Bibliography
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DESCRIPTION OF INDUSTRY

An immutable, unhackable distributed ledger of digital assets is a platform for truth and trust.
The implications are staggering not just for the financial services industry but also right across
virtually every aspect of the society.
The Financial Industry has been trying to experiment with blockchain by replicating existing
asset transactions on the blockchain. While this allows some scope for efficiency implication of
a blockchain solution, what gets missed out is
the ecosystem implications of a blockchain
solution. In infrastructure terms the
blockchain is an open source software that is
built to support the transfer of digital assets
amongst market participants in real time.
Using any preferred blockchain’s APIs one
can showcase a dramatic reduction in asset
transfer costs and timelines. Most bank
implementations are focused on this aspect. But while scaling proof of concept into a real world
scenario, financial institutions end up implementing the same application layer that exists
currently with all the current checks and balances.

Commercial Banks: Provide a wide range of financial services, such as accepting deposits,
lending money, and offering basic financial products.

Investment Banks: Focus on assisting corporations and governments in raising capital through
underwriting securities, mergers and acquisitions, and advisory services.
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Investment Management:

Asset Management: Involves managing portfolios of securities (stocks, bonds, etc.) on behalf of
individuals, institutions, or mutual funds.
Hedge Funds: Private investment funds that employ various strategies to generate high returns
for their investors.
Private Equity: Funds invested in privately held companies, aiming to provide capital and
expertise to support growth and enhance value.
Insurance: Life Insurance: Offers financial protection to individuals and families against the risk
of death, providing benefits upon the policyholder's demise.
Property and Casualty Insurance: Covers damages to property and legal liabilities arising from
accidents or other unforeseen events.

Financial Technology (Fintech):

Digital Payments: Companies providing online payment solutions, mobile wallets, and digital
currency platforms.
Peer-to-Peer Lending: Online platforms that connect borrowers directly with lenders, bypassing
traditional financial institutions.
Robo-Advisory: Automated investment platforms that use algorithms to provide personalized
investment advice.
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LITERATURE REVIEW

What is block chain technology?

According to Yaga et al. (2019) blockchains are a type of digital ledger that cannot be altered
without leaving clear evidence of having been altered. Since these digital ledgers are deployed
in a distributed fashion, there is typically no central repository or authority, such as a bank,
corporation, or government. This is due to the lack of a necessity for a centralized repository
and authority. At its most basic level, blockchains enable a group of people to track transactions
among themselves via a shared ledger. Because of how the network was designed to work, once
a transaction has been recorded on a blockchain, it cannot be modified, making it impossible to
modify the transaction. In other words, a Blockchain is a decentralized, unchangeable ledger
that makes it easier to record transactions and manage assets within a commercial network. An
asset is anything that can be physically touched, like a house, car, money, or a piece of land.
However, intangible things like intellectual property, patents, copyrights, or trademarks can also
be viewed as assets. A blockchain network can be used to track and exchange anything of value,
which lowers the associated risks and expenses for all parties involved (Saberi et al., 2019; Yaga
et al., 2019). According to Yaga et al. (2019), the introduction of the Bitcoin network in 2009
marked the beginning of widespread public awareness of blockchain technology. When using
Bitcoin and other systems that are theoretically similar to it, it is hypothesized that the transfer
of digital information that represents digital payment takes place through a distributed network.

The first of several cryptocurrencies currently in use was Bitcoin, and there are currently many
additional cryptocurrencies. Blockchain technology enables Bitcoin users to digitally sign
documents and transfer their rights to those documents to other users. This transmission is
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publicly recorded in the Blockchain data, allowing all network participants to independently
verify the validity of the transactions. The durability of the blockchain in the face of attempts to
alter the ledger is aided by the use of cryptographic techniques as well as the fact that each
participant in the bitcoin blockchain is in charge of keeping and administering their copy of the
ledger. Blockchain technology’s advancement has made it possible to create a variety of
cryptocurrency systems, including Bitcoin and Ethereum. As a result of this, blockchain
technologies are commonly considered to be limited to Bitcoin or maybe cryptocurrency
applications in general. Nevertheless, this is not the case. This image continues to exist even
though the technology is now used in a greater variety of applications and is being researched in
a variety of different industries (Pilkington, 2016; Saberi et al., 2019; Yaga et al., 2019). Since
businesses are dependent on information and their success is directly proportional to the speed
with which they receive and act upon that information, “blockchain technology is ideally suited
for the delivery of information since it provides information that is, immediately shared and
completely transparent and that is, stored on an immutable ledger that can only be accessed by
network members who have been granted permission to do so”. A blockchain network can keep
tabs on orders, payments, accounts, production, and a lot more. Since members of the network
share a single view of the truth, you can view all of the details of a transaction from beginning
to end”. This provides you with increased confidence, in addition to new opportunities and
efficiencies.
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PART II
INDUSTRY ANALYSIS
The finance industry is a broad sector that encompasses various financial services, including
banking, investment management, insurance, and financial technology (fintech) companies. It
plays a crucial role in facilitating economic growth, capital allocation, and risk management.
For MBA students interested in pursuing careers in finance, understanding the industry's
dynamics, trends, and challenges is essential. This industry profile provides an overview of the
finance industry, highlighting its key segments, trends, and career opportunities.

Key Segments:

Banking:

Commercial Banks: Provide a wide range of financial services, such as accepting deposits,
lending money, and offering basic financial products.
Investment Banks: Focus on assisting corporations and governments in raising capital through
underwriting securities, mergers and acquisitions, and advisory services.
Investment Management:

Asset Management: Involves managing portfolios of securities (stocks, bonds, etc.) on behalf of
individuals, institutions, or mutual funds.

Hedge Funds: Private investment funds that employ various strategies to generate high returns
for their investors.
Private Equity: Funds invested in privately held companies, aiming to provide capital and
expertise to support growth and enhance value.
Insurance:
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Life Insurance: Offers financial protection to individuals and families against the risk of death,
providing benefits upon the policyholder's demise.
Property and Casualty Insurance: Covers damages to property and legal liabilities arising from
accidents or other unforeseen events.
Financial Technology (Fintech):

Digital Payments: Companies providing online payment solutions, mobile wallets, and digital
currency platforms.
Peer-to-Peer Lending: Online platforms that connect borrowers directly with lenders, bypassing
traditional financial institutions.
[18:44, 6/21/2023] +91 89608 42530: Robo-Advisory: Automated investment platforms that use
algorithms to provide personalized investment advice.
Industry Trends:

Technological Innovation: Advancements in artificial intelligence, blockchain, data analytics,

and cloud computing are transforming the finance industry. Fintech companies are disrupting
traditional financial services, offering innovative solutions and improving efficiency.

Regulatory Environment: Stringent regulations have been implemented since the global
financial crisis to enhance transparency, risk management, and consumer protection.
Compliance and risk management have become critical focus areas for financial institutions.

Sustainable Finance: Environmental, Social, and Governance (ESG) considerations are gaining
prominence in the finance industry. Investors are increasingly focusing on sustainable investing,
driving the demand for ESG-compliant products and services.
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Digital Transformation: The industry is experiencing a shift towards digital channels, with
online banking, mobile apps, and digital customer experiences becoming the norm. Traditional
banks are investing heavily in digital technologies to enhance customer engagement and
streamline operations.

Career Opportunities:

Investment Banking Analyst/Associate: Work on mergers and acquisitions, financial analysis,

and capital raising activities for corporations.

Asset Manager/Portfolio Manager: Manage investment portfolios and make investment

decisions to generate returns for clients or institutions.

Risk Analyst: Assess and manage financial risks,

including credit risk, market risk, and operational
risk, for banks and financial institutions.

Financial Consultant: Provide advisory services to

individuals or companies on financial planning,
investment strategies, and wealth management.

Fintech Specialist: Work in innovative fintech companies, focusing on areas such as digital
payments, blockchain, or robo-advisory.

The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44
foreign banks, 43 regional rural banks, 1,484 urban cooperative banks and 96,000 rural
cooperative banks in addition to cooperative credit institutions. As of September 2021, the total
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number of ATMs in India reached 213,145 out of which 47.5% are in rural and semi-urban
areas.

According to the RBI, bank credit stood at Rs. 116.8 lakh crore (US$ 1.56 trillion) on 31st
December 2021.

As of February 2022, credit to non-food industries stood at Rs. 114.10 trillion (US$ 1.53
trillion).

In FY18-FY21, bank assets across sectors increased. Total assets across the banking sector
(including public and private sector banks) increased to US$ 2.48 trillion in FY21.

In FY21, total assets in the public and private banking sectors were US$ 1,602.65 billion and
US$ 878.56 billion, respectively.

RBI has decided to set up Public Credit Registry (PCR), an extensive database of credit
information, accessible to all stakeholders. The
Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2017 Bill has been passed and is
expected to strengthen the banking sector. Total
equity funding of the microfinance sector grew
42% y-o-y to Rs. 14,206 crore (US$ 2.03
billion) in 2018-19.

As of February 21, 2022, the number of bank

accounts—opened under the government’s
flagship financial inclusion drive ‘Pradhan Mantri Jan Dhan Yojana (PMJDY)’—reached 44.63
crore and deposits in the Jan Dhan bank accounts totaled Rs. 1.58 trillion (US$ 21.25 billion).
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Rising income is expected to enhance the need for banking services in rural areas, and therefore,
drive the growth of the sector.

India is the world's largest market for Android-based mobile lending apps, accounting for ~82%
of all online lenders worldwide. India currently has 887 active lending apps, which is relatively
low, as there are few suppliers of blockchain technology and the technology itself is relatively
standardized. Additionally, the cost of switching between suppliers is relatively low, as most
blockchain-based systems are designed to be interoperable with each other.
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EMERGING TRENDS OF BLOCKCHAIN TECHNOLOGIES IN THE FINANCE

INDUSTRY

1. Blockchain technology is an emerging trend in the finance sector that has the
potential to revolutionize the way financial transactions are conducted. Some of the
key features of blockchain technology that make it attractive to the finance sector
include:
● Decentralization: Blockchain-based systems are decentralized, which means that they are
not controlled by any single entity. This can help to reduce the risk of fraud and increase
transparency in financial transactions.
● Security: Blockchain-based systems use advanced cryptographic techniques to secure
transactions, which can help to reduce the risk of hacking and other forms of cybercrime.
● Efficiency: Blockchain-based transactions can be processed more quickly and at a lower
cost than traditional financial transactions, which can help to reduce the cost of financial
services and increase access to financial services for underserved populations.
● Smart contracts: Blockchain-based systems can be used to create smart contracts, which
are self-executing contracts that can be programmed to automatically execute when
certain conditions are met. This can help to reduce the need for intermediaries in financial
transactions and increase the efficiency of financial services.
2. Overall, blockchain technology has the potential to transform the finance sector by
making financial transactions more secure, efficient, and transparent.
Technological Innovation: Advancements in artificial intelligence, blockchain, data
analytics, and cloud computing are transforming the finance industry. Fintech
companies are disrupting traditional financial services, offering innovative
solutions and improving efficiency.
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● Regulatory Environment: Stringent regulations have been implemented since the global
financial crisis to enhance transparency, risk management, and consumer protection.
Compliance and risk management have become critical focus areas for financial
institutions.
● Sustainable Finance: Environmental, Social, and Governance (ESG) considerations are
gaining prominence in the finance industry. Investors are increasingly focusing on
sustainable investing, driving the demand for ESG-compliant products and services.
● Digital Transformation: The industry is experiencing a shift towards digital channels,
with online banking, mobile apps, and digital customer experiences becoming the norm.
Traditional banks are investing heavily in digital technologies to enhance customer
engagement and streamline operations.
● Investment Banking Analyst/Associate: Work on mergers and acquisitions, financial
analysis, and capital raising activities for corporations.
● Asset Manager/Portfolio Manager: Manage investment portfolios and make investment
decisions to generate returns for clients or institutions.
● Risk Analyst: Assess and manage financial risks, including credit risk, market risk, and
operational risk, for banks and financial institutions.
● Financial Consultant: Provide advisory services to individuals or companies on financial
planning, investment strategies, and wealth management.
● Fintech Specialist: Work in innovative fintech companies, focusing on areas such as
digital payments, blockchain, or robo-advisory..

3. Payments are the first and foremost use case of any banking and/or financial
system. When it comes to blockchain finance, both central and commercial banks
all over the world are now tapping into this new technology in terms of payment
processing and potential issuing of their own digital currencies. This trend also
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embraces cross-border payments, which have been powered mostly by Swift or

Western Union until now.

o Usage Examples: In 2016, Westpac, one of Australia’s largest banks, partnered

with Ripple, an enterprise blockchain solution for global payments, to implement a
low-cost cross-border payment system based on blockchain technology. In 2015,
CBA, another large Australian bank, was planning to partner with Ripple in order
to develop a ledger system on blockchain for payments settlements between its
subsidiaries. In 2016, the US Federal Reserve was working with IBM to implement
a blockchain-based digital payment system. And these are not the only examples of
banks using blockchain – other well-known banks tapping into the blockchain are
Deutsche Bank, Barclays Bank, BNP Paribas, etc.

4. Stock Exchange and Share Trading

● Buying and selling stocks and shares has always involved a lot of third parties, such as
brokers and the stock exchange itself. Here is how trading works:
● The buyer or seller initiates the trade.
● A broker sends a transaction to a stock exchange.
● The transaction is matched with another party (the counterparty).
● The transaction is sent to the Central Counterparty Clearing House for risk evaluation.
● The buyer’s or seller’s representatives work with the Central Securities Depository (CSD)
to record the transfer.
● The transaction is sent to the Registrar or Transfer Agent of Initial Trade to update their
list of shareholders.
● As you see, the traditional stock exchange process involves lots of stages and
bureaucracy and can take up to 3 days. However, the decentralized nature of blockchain
technology in banking can remove all those unnecessary intermediaries and enable
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trading to be run on computers all over the world. No more dedicated servers united into
an interconnected network.
● Usage Examples: In 2015, Nasdaq, the world’s second-largest stock exchange company,
was planning to use blockchain for their Private Market Platform. They were going to
implement a colored coin concept that could help to distinguish the coins used for trading
from other coins. Besides, together with Citigroup, Nasdaq invested into the Chain
blockchain ledger to power a shared and trusted distributed database that records all
transactions and ownership changes in real-time.

5. Trade Finance
● Blockchain also plays an important role in the trade finance sector – financial activities
that are related to commerce and international trade (not stock exchange trading). Even in
today’s disruptive world of technology, many trade finance activities still involve lots of
paperwork, such as bills of lading, invoices, letters of credit, etc. Of course, many order
management systems allow us to carry out all this paperwork online, but still, it consumes
lots of time.
● Usage Examples: In 2016, Ornua, an Irish manufacturer of dairy products, partnered
with Barclays to complete the world’s first blockchain and banking trade transaction. In
2017, IBM and Maersk collaborated to work on the first cross-border, blockchain-based
supply chain solution.

6. Digital Identity Verification

● Online financial transactions are impossible without identity verification. However, this
verification requires a lot of steps to be taken, such as:
● Face-to-face checking (can be also via a video call such as Skype).
● Authentication: The bank client needs to prove their identity every time they log in to the
service.
● Authorization: A proof of the client’s intentions is needed.
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● All of these steps need to be taken for each new service provider. However, blockchain
makes it possible to securely re-use identity verification for other services.
● Usage Examples: Cambridge Blockchain and Tradle are examples of fintech startups that
are using blockchain to disrupt banking and working on blockchain-based customer
identification systems.
● Tradle uses blockchain to store proofs of data verifications and give total ownership and
control of data to the owner. This means the customer manages the sharing with banks
directly, thus the customer becomes the utility. Tradle’s approach enables the owner to
share their data across lines of business, with any institution and across any border
without breaching any data locality laws, or regulations such as GDPR.
● Another example is ID2020, a project aimed at creating digital identities for people who
have no paper IDs. The project is supported by Accenture, Microsoft, and the Rockefeller
Foundation.
● Tradle
7. Syndicated Lending

● Syndicated lending refers to providing loans to individuals by a group of lenders,

typically banks (a syndicate). Due to several participants involved, the traditional
processing of such syndicated loans by banks can take up to 19 days. Banks that process
syndicated loans face the following challenges:
● Know Your Customer (KYC) – client identity verification.
● Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) – legal actions aimed at
prevention, detecting, and reporting of money laundering activities.
● Blockchain financial services can supercharge this process and make it more transparent.
With blockchain’s decentralized ledger, banks within a syndicate can distribute tasks
related to local compliance, KYC or BSA/AML and link them to a single customer block.
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● Usage Examples: In 2016, Credit Suisse, Symbiont, R3, and Ipreo successfully finished
an initial stage of a project related to the use of blockchain technology on the syndicated
loan market. In April 2018, seven international banks, specifically BNP Paribas, BNY
Mellon, HSBC, ING, Natixis, and State Street, have united to support Fusion
LenderComm by Finastra, a blockchain platform for syndicated loans.

8. Accounting, Bookkeeping, and Audit

● Probably no other sphere that involves as much paperwork as accounting, and it is
digitalized relatively slowly. The reason behind that may be in strict regulatory
requirements regarding data validity and integrity. Therefore, accounting is another
domain that can be transformed with the power of blockchain technology finance, from
simplifying the compliance to streamlining the traditional double-entry bookkeeping.
Instead of keeping separate records based on transaction receipts, companies can write
their transactions directly into a joint register, with the entries distributed and
cryptographically protected. As a result, the records are more transparent, and any
attempts of forging are almost impossible. Think of it as an “electronic notary” verifying
the transactions. In addition, blockchain’s smart contracts can be used to automatically
pay invoices.
● Usage Examples: In 2018 PricewaterhouseCoopers announced the launch of the first
blockchain auditing service that will allow checking how the companies are using fintech
blockchain.

9. Credit Reports for Businesses and Individuals

● Blockchain finance can also help individuals and small businesses to quickly get loans
based on their credit history. It may take a long time for lenders to review the borrower’s
credit history. Traditional business credit reports provided by third-party credit bureaus
are not available for small business owners. Besides, paying companies to access their
sensitive data sounds strange and insecure. However, blockchain can provide tools that
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will allow borrowers to make their credit reports more accurate, transparent, and securely
shareable. Here’s how it works with blockchain:
● The data owner places their transaction history into the blockchain and secures it with a
private key.
● The encrypted transaction is stored outside the blockchain.
● The hashed encrypted transaction is stored inside the blockchain with timestamps and
metadata.
● The data buyer submits the criteria for credit history.
● The smart contracts identify and verify the potential data based on the data owner control
criteria.
● The blockchain engine filters the data and returns the results.
● Usage Examples: Credit Dream is a Brazilian mobile blockchain platform that connects
lenders and borrowers in any country for affordable and verified loans. Lumeno.us is a
New York-based startup that provides blockchain technology financial services so that
business owners can securely share their data to get a loan, find trusted partners, or
manage a portfolio or network.

10.Hedge Funds
● A hedge fund is an investment partnership consisting of a fund manager and a group of
investors (limited partners). However, hedge fund participants are traders rather than
ordinary investors. The purpose of a hedge fund is to maximize investor returns and
minimize risks. According to Autonomous NEXT, the number of hedge funds that trade
cryptocurrencies has doubled between October 2017 and February 2018. However, one
should distinguish between the traditional crypto hedge funds and decentralized crypto
hedge funds.
● Usage Examples: Examples of decentralized crypto hedge funds are Alphabit
Fund, Blocktower Capital, CoinShares, Crypto Asset Fund, and many others.
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CRITICAL ANALYSIS (PROS AND CONS) OF THE BLOCKCHAIN

TECHNOLOGIES IN FINANCE INDUSTRY

Blockchain Pros

▪ Blockchain technology can offer increased transparency, security, and efficiency in

financial transactions. It can also reduce the need for intermediaries and lower transaction
costs.

▪ Blockchain technology can also enable the creation of secure and transparent supply

chains, where every step of the production and distribution process is recorded on a
tamper-proof digital ledger. This can help to increase efficiency, reduce waste, and
improve sustainability. Furthermore, blockchain can enable the creation of decentralized
identity systems that are more secure and privacy-preserving than traditional identity
systems. This can help to reduce identity theft and fraud, and increase access to services
for marginalized populations..

▪ Trade Finance

Another area where blockchain is expected to have a significant impact is in trade

financing. All financial activities relating to international trade and commerce are
referred to as trade finance. Did you know that invoices, letters of credit, and bills are still
used in many trade finance transactions today? Many order management systems allow
you to complete this task online, but it takes a long time.
Blockchain can provide a tamper-proof digital ledger that can be used to track and verify
financial transactions. It can also enable faster and more secure cross-border payments,
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reduce fraud, and increase financial inclusion for those who lack access to traditional
banking services..

Disintermediation
First of all, with blockchain, you get a distributed system. It means that it gets rid of any
middlemen from your system. But how is that an advantage? In reality, middlemen tend to be
the third party source that connects you to your services.

However, in the business world, from every service the middlemen offer, they get a cut. In
reality, a small amount of payment might not seem like much, but it does add up when your
service requires a 10-15 step process.

Other than that, there’s no way of knowing whether the middlemen would be honest with their
services. In reality, corruption runs deep, and in many cases, these intermediates tend to abuse
enterprises and consumers for their personal gain.

Thus, by getting rid of them, the whole trust issue is solved. Let’s see the next advantage in this
pros of blockchain guide.

High-Quality Data
Blockchain technology offers a superior level of data quality. In reality, it is a distributed ledger
system where it stores data. But how does it provide high-quality data? Well, you need to know
that low-quality data would not convert into high-quality data within a night. That’s not how it
happens.
Anyhow, this distributed ledger technology offers a consensus process that allows you to filter
out any bad data with useful data. It means that no one can just add any kind of information on
the ledger or even manipulate the existing ones.
So, when every piece of information is being verified before getting added to the ledger, it will
eliminate any false data.
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Moreover, it also gets rid of the issues that come from human-made errors. As every single
piece of information is verified, there’s no scope for a human-made mistake.

Thus, it significantly increases the quality of data. Anyhow, let’s move on to the next advantage
in this blockchain pros and cons guide.

Durability and Security

Blockchain offers durability at its best. You could think of it as the internet where there’s
built-in robustness. In reality, the overall structure of the technology makes it so durable.
Moreover, as it stores blocks of information around the network, it makes sure that there is no
single point of failure or any single entity controlling it.

This quality makes the system inherently durable. More so, as no one can alter the blocks, it
remains to be a solid secured platform. Other than that, it’s quite efficient in fending off hacking
attempts as well.

So, there’s little to no possibility of overpowering this network. Anyhow, let’s see the next
advantage in this blockchain pros and cons guide.

High Level of Integrity

Another great advantage of blockchain is the level of integrity. Compared to any other network
systems out there, blockchain offers the highest level of integrity so far. But what does it mean?
In reality, it means that all your data will always be the right one, and no one can alter them
once it’s on the ledger.

More so, the process of storing the information and consensus processes is also robust.
Moreover, any user can’t just make changes to the verification as he/she pleases. Thus, it would
offer accurate and reliable data every single time when you transact or store any other
information.
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On the other hand, every blockchain’s hash ID plays a huge role in maintaining this property.
Let’s check out the next advantage in this blockchain pros and cons guide.
Immutability and Transparency
For the next advantage in this blockchain pros and cons guide, we’ll be elaborating on
transparency and immutability. Blockchain comes with an immutable storage system where you
can’t change any single form of data or let alone delete them completely.

In reality, cryptographic hashing plays a huge role in maintaining an immutable structure. As

every single block will have a Hash ID, any changes to that block’s data would change the ID
drastically. And it’s impossible to recreate the same Hash ID again.
Thus, if anyone tries to change the data, all the other users would notice it right away. Anyhow,
most of the ledger system on this technology is also open for everyone to see. Even in private
blockchains, there is common ledger information that anyone can see anytime.
Longevity and Reliability
Another great advantage in this pros and cons of blockchain guide is the data reliability and
longevity. As you already know, blockchain is immutable, transparent, and offer integrity. All of
these characteristics result in the reliability and longevity of the technology.

Furthermore, as no one can just change the rules of the blockchain as they please, it remains
intact. More so, as it can offer viable solutions for various business issues for the long term, it
becomes a reliable technology.

Many enterprises are already considering altering their legacy networks with blockchain for the
long term.

Blockchain Technology Cons

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Redundant Performance
It’s the first con in the advantages and disadvantages of blockchain list so far. In reality, the
computation needs of this technology are more repetitive than centralized servers. It’s because
every time the ledger is updated, all the nodes need to update their version of the ledger as well.

It’s because the distributed nature of the ledger system mandates that every node should have a
copy of the ledger system. Thus, it needs to undergo the same process over and over again.

Complex Signature Verification Process

Another con in our advantages and disadvantages of blockchain list is the signature verification
process. Basically, for every transaction in the system, you’ll need a private-public
cryptographic signature verification.

It then uses the ECDSA (Elliptic Curve Digital Signature Algorithm) to ensure that the
transaction happens between the correct nodes. Thus, every node needs to verify the
authenticity of the user, which can be a tricky and complex process.

Private Keys
To transact on the network, you’ll need to own a private key. Even though other users can see
your public key, a private key is much more crucial as it remains hidden. Furthermore, all the
blockchain addresses will have a private key.
You need to keep your private key secured by any means if you don’t want other people to
misuse your assets. However, if you lose your private key, you’ll lose access to your funds on
the network, as well. There’s no way to recover them anymore.
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PESTLE ANALYSIS

A PESTLE analysis of blockchain

technology in the finance sector would examine
the political, economic, sociocultural,
technological, legal, and environmental factors
that could impact the adoption and
implementation of blockchain in finance. For
example:

Political: Government regulations and policies around digital currencies and blockchain
technology can impact adoption and implementation. . Regulators globally have raised the
alarm over cryptocurrencies, saying they may aid money laundering and terrorist financing, hurt
consumers and undermine trust in the global financial system. Such concerns over security as
well as criminal use of cryptocurrencies lead to widespread government opposition and
regulation. However, due to the decentralized nature and lack of power structures inherent in
cryptocurrencies, many view regulations could stabilize the market in order to drive adoption
and growth and reduce the volatility that has been a hallmark of the industry. Regulations will
offer greater legitimacy and give users and institutional clients the confidence to invest.
Economic: Blockchain technology has the potential to reduce transaction costs and
increase efficiency in financial transactions, which can have economic benefits. “In
cryptography we trust”, undoubtedly trust is the single most important element in the banking
industry, and thus why they exist. Amid G20 summit 2018, the ministers and central bank
governors were warned that cryptocurrency could threaten international financial stability with
greater use and interconnections with the rest of the financial sectors. Crypto assets raise a host
of issues around consumer and investor protection. Cryptocurrency dangers also come from
their use to shield illicit activity and for money laundering and terrorist financing. With the
 29

above mentioned concerns, Financial Stability Board Chair Mark Carney urged the finance
ministers to lessen the risks by working together to improve conduct, market integrity and cyber
resilience in the cryptocurrency sector (Terzo, 2018(a)). Without these improvements, the G20
advisory unit chief cautioned confidence in the global financial system could shrink if
cryptocurrency use and interconnectedness become commonplace and threats appear (Knutson,
2018). Will cryptocurrency eventually substitute the current financial market, or will it work out
to improve.

Sociocultural: The adoption of blockchain technology in the finance sector could be influenced
by societal attitudes towards new technology. For example, some people may be hesitant to
adopt blockchain-based systems because they are unfamiliar with the technology or have
concerns about its security. Additionally, some people may be more likely to adopt
blockchain-based systems if they perceive them to be more secure or trustworthy than
traditional financial systems.

Technological: Advancements in blockchain technology can impact the development and

implementation of blockchain-based financial systems. . The transparency and security of data
stored in a blockchain facilitate trust and efficiency between users in an unprecedented way.
Marie Wieck, IBM’s general manager of blockchain, indicated that Blockchain has its origins in
digital transformation and disruption, it is the answer to the 2008 financial and mortgage crisis.
A rather interesting note is that most people focus on blockchain’s initial entry point and use
case, Bitcoin. They associate anything blockchain with Bitcoin and that is not right. There is
much more to blockchain than Bitcoin and cryptocurrencies. Currently IBM is working on its
hyperledger project on food-chain safety and digital identity. One of the biggest disadvantages
of having a centralized data storage system is the risk of data breaching of consumers’ private
info. Equifax, one of America’s three major credit reporting agencies, announced back in
September 2017 that their system had been breached, exposing information of approximately
 30

143 million consumers, the affected data included sensitive materials such as Social Security
numbers, driver’s license numbers, and even credit card numbers (Bernard, 2017). This is where
blockchain technology kicks in, to help build the infrastructure needed to prevent these types of
breaches
Legal: Legal frameworks around digital currencies and blockchain technology can
impact adoption and implementation.
The energy consumption of blockchain technology can impact its sustainability and
environmental impact Reduce Remittance cost and protect own assets The case of Bitcoin in
Africa highlights several interesting elements, cryptocurrencies and mobile transfers have
created an opportunity for people in Africa to control and protect their assets. In countries
where there are political crisis and economic turmoil, people live in a chaos, which in turn
caused them to lose their trust to the government and the financial
However, this would prove to work against the idea of distributed systems. By cutting out
the middleman, the cost of remittance can be drastically reduced as well as the hassle required
to receive international money transfer. This eases the life of those in the developed world, at
the same time it provides a platform for illicit uses of money transfer.
Environmental: The use of blockchain technology in the finance sector could have
positive environmental impacts by reducing paper usage and increasing efficiency. For example,
blockchain-based systems could reduce the need for paper-based documentation, which could
reduce deforestation and other environmental impacts associated with paper production.
Additionally, blockchain-based systems could reduce the need for intermediaries, which could
lower energy consumption and other environmental impacts associated with traditional financial
systems.
 31

Conclusion
After conducting an industry analysis and literature review on the role of blockchain technology
in the finance industry, the following conclusions can be drawn:

Blockchain technology has the potential to revolutionize the finance industry by addressing key
challenges such as security, efficiency, and trust. It provides a decentralized and transparent
system of record-keeping that reduces the risk of fraud and errors.

In the payment systems realm, blockchain-based cryptocurrencies have disrupted traditional

methods by offering fast, low-cost, and borderless transactions. The use of smart contracts
enables programmable payments, automating processes and reducing the need for
intermediaries.

The application of blockchain in banking can streamline operations, enhance transparency, and
improve security. It allows for faster and more secure cross-border transactions, reducing
reliance on intermediaries and lowering transaction costs. Blockchain-based identity
verification systems can also improve customer onboarding while ensuring data privacy and
security.

Blockchain has the potential to transform trade finance by digitizing trade documents,
automating processes, and providing real-time visibility into the movement of goods. This can
lead to increased efficiency, reduced fraud, and streamlined trade financing. Smart contracts on
the blockchain can automate payment settlements based on predefined conditions, eliminating
paperwork and improving overall efficiency.

In asset management and capital markets, blockchain enables the tokenization of assets,
fractional ownership, increased liquidity, and improved accessibility to investment
opportunities. Peer-to-peer lending platforms built on blockchain can eliminate the need for
traditional financial intermediaries, making the process more efficient and cost-effective.
 32

However, challenges remain for widespread blockchain adoption in the finance industry.
Scalability, interoperability, and regulatory frameworks need to be addressed to ensure seamless
integration into existing financial systems.

In conclusion, blockchain technology holds immense potential in transforming the finance

industry. Its applications in payment systems, banking, trade finance, asset management, and
capital markets are disrupting traditional practices and unlocking new possibilities. As the
technology continues to mature and regulatory frameworks evolve, blockchain is expected to
play a significant role in shaping the future of finance, driving innovation, and fostering greater
financial inclusion.
 33

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