It is actually very important for users to know a little about blockchain technology before trying to delve into any digital banking and financing. Blockchain is very important because most of the centralized economies that seem to be succeeding today have the following significant flaws:
- Lack of Trust: Thanks to the internet today, it is very easy to transfer and receive information freely without any form of delays, but it is quite impossible to easily transfer or receive value without any form of intermediary or third parties. The third parties that are required for this are losing trust, 92% of millennials, that is over 2.5 billion people have no trust for decentralized financial institutions because their data’s privacy is either threatened or undermined by the breaches in security.
- A lot of people are excluded: So many people have no access to basic financial services and they cannot get involved in the global economy.
- Transaction processing speed is slow: Before value can be transferred from a country to another or just from one financial institution to another around the same geographical location, it can take a couple of days or weeks.
- Presence of multiple Inefficiencies: The cost for financial transactions in the global GDP is 6%, which is more than $4 trillion in total cost in the world.
With this, it is obvious that open-source blockchain technology is in possession of the key that opens the door to a global borderless economy that is open, transparent, and secured.
A blockchain is actually a database of recorded transactions that can not be altered or changed and that is shared across various networks of computers referred to as nodes. Transactions are then carried out through the help of the network, it is verified and connected together into block form. Each block of transactions is being verified by the decentralized network of the participating node and it is joined together with the previous blocks.
Each block is being assigned with a peculiar code known as a hash with which users can reference in the future and confidently prove to anyone that of a truth, their transactions were added into a particular block. This immutable database is opened and free for every user to read from and write to it.
Reasons why this technology has not been adopted for banking and financing purposes
It is actually the aim of the blockchain solutions in existence to solve the problems mentioned earlier but the drawback is that they are either permission or they are slow. The number of transactions that are flowing through the economy on a daily basis cannot be handled by a slow blockchain. Permissioned blockchain, on the other hand, concentrates power entirely in the hands of some very few users and cannot welcome the arrival of new users.
Ways Algorand solves the above blockchain issues
Algorand is the first-ever blockchain that is permissionless and scalable. This generally brings about a few numbers of benefits and advantages over any other platform. These advantages are:
- Trust: Algorand built trust from cryptographic and decentralization tools that ensure the immutability of the shared ledger. The security of the decentralized network can be contributed upon by any user by simply participating in the consensus. Digital assets are not actually being stored in a central location but they are being distributed across a global ledger with the use of the highest level of cryptography.
- Inclusion: Absolutely anyone has the ability to submit new transactions and can read the whole history of the transactions.
- Speed: There are no issues if delays, as users can confidently have transactions with anyone across the globe in a very short time.
- Less cost of processing: The computational cost of blockchain participation is being minimized by Algorand. With this, the cost of transactions can also be reduced.
With this, it is crystal clear that Algorand is equipped with the technical innovation that is required by a platform to deliver a decentralized, scalable, and secured transactions. The first of it kind Algorand’s permissionless pure proof of stake (PoS) protocol is responsible for supporting the scale, the open participation, and the transaction finality that is being needed by its users to build opportunities and live up to the promises of blockchain technology. With Algorand, the standards for blockchain technology are being defined and it is making it possible to have a new borderless economy.
Algorand and Bigtech
Just recently from the chart of the announcement of the first-ever stablecoin to be integrated with the Algorand blockchain, the Algorand team is pleased to announce yet another milestone in the mission to establish the infrastructure that is needed for the new decentralized assets and financial instruments. Algorand is now a member of the International Swaps and Derivatives Association (ISDA).
One of the major aims of Algorand is an expansion of the depth and breadth of possible classes of transactions by the means of an advanced financial instrument on the blockchain. This would be achieved by working with the International Swaps and Derivatives Association (ISDA) on the implementation of their Common Domain Model (CDM) on the Algorand blockchain. This will also enable the use of existing templates and programming tools by financial organizations for the easy creation of decentralized financial instruments.
Also, Algorand has been in some projects with financial institutions for the development of smart derivatives contracts that comply with the standards of ISDA. Existing legal constructs would be formalized into executable code by these smart derivatives contracts and will allow an increase in the automation and efficiency in the financial industry.
With such a global market that has financial derivatives that represent around $10 trillion in the gross market value and above $500 trillion in the notional value, the ISDA is very important in assisting professional financial institutions to participate in the market in such a way that is standardized and transparent. The Common Domain Model was developed by the ISDA so that all financial institutions can have a single and common digital representation of all of the derivatives trade events.
Algorand (ALGO) Official Website