Arjun Khazanchi
Technology has been at the forefront of innovation and growth in all industries in recent times. The many benefits that tech infusion brings to a business in terms of time and cost-effectiveness, enhanced efficiency, and greater precision are primarily the reason for the increasing importance of tech. In view of the several perks of technology as well as the changing landscape of industries in this widely digitized era, technical adoption has become indispensable for all sectors. In this scenario, the finance sector has not been an exception either as Fintech has emerged as the norm of the day.
Anything based on technology is subject to change as and when advancements occur. The domain of Fintech too undergoes these changes every now and then due to the rapid technological development that is prevalent today. The latest technical trend that is predicted to revolutionize the Fintech industry in the coming times is Crypto and blockchain. A comprehensive overview of how crypto lending platforms can transform the way the Fintech industry functions is provided in this article.
What is a Crypto?
Cryptocurrency is a type of decentralized digital currency. The transactions of the currency are tracked using blockchain technology. Blockchain-based tracking essentially involves storing all transactions at a given virtual space in chronological order.
Cryptocurrency, as a field, is fast growing. A number of prominent brands across the globe have come forward and accepted it as a form of payment already, and the list is only expected to grow in the future. This rapid acceptance of this form of currency has not come without reason as there are several perks of this payment option.
Since cryptocurrency can be traded from smartphones, its accessibility and use are easy for people from all strata to avail of it. Another area where the use of crypto is gaining prominence is in smart contracts. Smart contracts are the contracts that make use of blockchain technology and cryptocurrency to mediate terms and conditions and ensure legal abidance.
Further, blockchain operates across multiple computers. To modify a chain, a majority of the computers have to approve, thereby making the process of altering blocks very tedious and complex. Since amending the blocks is extremely tough and even borderline impossible in this setting, blockchain provides cryptocurrency a greater degree of security and makes it an attractive payment prospect.
The role played by crypto platforms in the Fintech industry Crypto platforms make the use of cryptocurrency easy and streamlined. Some ways in which the use of crypto is transforming the Fintech industry for the better are listed as follows:
- Greater security: The blockchain-based currency, as established, is a secure and reliable payment option. The fund flow record is maintained and controlled in a streamlined manner across a series of blocks of multiple network databases. This allows everyone with permission to access and supervise the entire blockchain. The clarity and transparency of the data maintenance greatly reduce any possible frauds or scams.
- Transparency: Blockchain transactions are pseudonymous, which enables every participant on the blockchain to access the history of transactions but at the same time not be able to see the actual private information. Therefore, each transaction carried on blockchain networks is traceable without disclosing the identity.
- Lesser risk: Blockchain employs cryptography which makes the transactions fixed and irreversible. This helps avoid mismanagement of both data and funds. By allowing transactions to take place directly between network participants, the crypto lending exchange platform helps evade lending risks, possible cyber-attack, money laundering, etc.
- Better Transaction Settlements: Blockchain technology makes the transactions and settlement processes streamlined and safe which enhances the overall user experience. This is possible principally because of the smart contracts, which allow and facilitate real-time settlements.
- Real-time transactions: The transactions on crypto platforms are conducted instantly, thanks to the use of smart contracts. These real-time transactions do away with the need for any intermediaries and facilitate direct and automatic loan transfers. Instantaneous transactions also help avert risks and support immediate validation of transactions and record them in real-time.
- Clear record of fund flow: Blockchain, by maintaining a clear, chronological, and centralized record of all transactions, enable transparency in transactions. It also marks funds as spent in an immutable record immediately after the real-time transaction which ensures that a user can’t spend the same amount twice.
Transformative role
The transformative role that crypto based lending platform can have cannot be understated. It gives the power to each person to become their own bank. Not only can they borrow from others at rates and conditions more favorable than traditional financial institutions, but they can also borrow against their own assets.
For example, one could deposit their crypto assets and take out a loan against their cryptocurrency. SO, when it appreciates, they have an increased asset position, plus the ability to meet urgent need for liquidity.
Credit forms the backbone of any healthy economy and the access to that credit determines it success in the global markets. Credit helps businesses and individuals grow in the backdrop of a growing economy. It provides business much needed capital to expand, maintain inventory, spend on research and development, and sustainably pay wages. Without easy access to credit, business is often placed under a glass ceiling which hampers their ability to grow.
Thanks to the internet the world has gone global much faster than air travel ever connected us. Finance seems to be stuck in the age of the aircraft, revolutionary no doubt, but still a relic of the past. The blockchain along with smart contracts and native web3 assets allow for innovate forms of financial instruments to be created and new opportunities to be explored using these as the new rails. Crypto lending is just one of the revolutionary applications that can be built by leveraging all the advantages mentioned above.
Summing Up
All industries across the world have been experiencing a shift in the way they operate owing to the rampant technological advancements and adoption. The finance industry too has undergone comprehensive changes in the view of the growing importance of technology, and fintech has emerged as a prominent presence. The use of blockchain in the fields of finance is on the rise owing to its several benefits and is expected to be a big part of the Fintech industry and innovations in the year 2022. This article provides an overview of how blockchain-based crypto platforms are expected to facilitate the functions of the Fintech industry.
