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Understanding FinTech – Blockchain Technology Is The Future

by on November 10, 2015
 

When discussing how people can change the financial landscape for good, there is one flaw to be found in most theories. No matter how easy companies make it for consumers to use traditional payment methods, there is no real innovation to be found in that regard. Coming up with completely new payment options, which do not rely on traditional financial infrastructure, is true FinTech innovation. Blockchain technology will play a major role in achieving that goal.

Grasping the Concept of the Blockchain

Before anyone can implement blockchain technology into their FinTech project, they will need to understand what the blockchain is first. The most common explanation of a blockchain is how this serves as a decentralized public ledger, displaying all transactions in real-time. This is the most common use case for blockchain technology: tracking payments and analyzing patterns.

But there is much more to the blockchain than just tracking payments. When people hear the blockchain can see all payments they have made and received, the topic of privacy is just on the horizon. Unlike what most people believe about the blockchain, it is not an anonymous technological solution, although a certain level of privacy is being kept intact.

What makes the blockchain so interesting to FinTech companies is not just its potential use for the financial sector itself. Granted, using an open source decentralized solution to transfer wealth all over the world in a matter of seconds, is appealing to any player in the financial sector. At the same time, companies keep wondering what else the blockchain is capable of

To answer that question properly, it all depends on which blockchain people are looking at. Is it the Bitcoin blockchain, or the Litecoin blockchain, or any other coin’s blockchain? Most of the valuable platforms in the digital currency space are built on top of the Bitcoin blockchain, making it the primary choice for FinTech. But Ethereum is proving to be an interesting contender as well.

Bitcoin, Ethereum, or A Totally Different Blockchain?

Picking the right blockchain for a FinTech project is not as easy as it may sound. There are various factors to take into consideration, such as the popularity of the coin’s network, whether or not there is active development taking place, and how that particular blockchain holds up with your expectations. Not every blockchain in the world can offer the exact same features (yet).

The Bitcoin blockchain seems to be the most obvious choice, although there are some features that are missing. Regarding the popularity of the network and active development, Bitcoin has got you covered. But whether or not the Bitcoin blockchain will fulfill your needs, in the long run, remains to be seen.

Ethereum’s blockchain, on the other hand, has improved upon Bitcoin’s blockchain offerings and added a few more functionalities. Smart contracts are gaining in popularity by the look of things, and this type of feature can only be found with Ethereum. Once again, it depends entirely on the business model for your company, as both contestants have their strengths and weaknesses.

Over the coming weeks, we will be posting a few articles on blockchain technology. Both Bitcoin and Ethereum will be mentioned, so make sure to keep an eye out!

Which blockchain solution has your preference? Can you explain why? Let us know in the comments below!

Header image courtesy of Shutterstock

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