To understand the influence of the technological and environmental factor on the blockchain technology first it needs to determine that what the blockchain technology is. The blockchain technology implies a ledger which is distributed and the records created by the ledger is encrypted in blocks for the security purposes (Swan, 2015). Each of these blocks relies on its previous block for the decryption process which makes it secure enough to be used in the financial sector. This system works on the principle of the data blockchain system which permanent in nature and the data of the transaction is directly stored into these blocks.
There are several technological factors on the diffusion of blockchain technology in the financial sector. These technological factors are the:
Improved Security:
The blockchain technology uses the decentralized type of database which does not hold any single point of data storage technique (Farnan et al., 2014). All the data used are distributed in a distributed type of database which makes it very difficult for an attacker to find the exact location of the attack (Kiayias & Panagiotakos, 2015). Still, by a successful attack, the hacker will not be able to get all the data stored in the database. Thus this technological impact makes the blockchain technology strong enough to be used in the financial sector.
Instant Transaction:
The process of the transaction is simplified in the blockchain technology. This type of transaction is made in a second or in a minute (Beck et al., 2016). The present transaction methods can take a huge time to complete the transaction. In the financial sectors, it is very much essential to complete a transaction in a limited amount of the time otherwise the merchant or the buyer can face a huge loss in the market because of the current market competition. So, in this case, the blockchain is providing a huge technological advancement in the financial sector.
Improved Transparency:
The blockchain technology can provide transparent transactions to its users. Transparent transaction means all the transactions are visible to the parties who are involved in that particular transaction (Underwood, 2016). The normal transaction method has raised some issues related to the transparency in the financial sector. The transparency is needed to build a strong bonding among the business partners and between to strengthen the relationship between the seller and customer which is very much important for the financial sector. The blockchain provides this technological factors of transparency in the field of finance which helped to strengthen the business relationships.
Reduced Errors:
Making errors can be a big issue in the financial sector. In this case, the blockchain technology can help the financial sectors by the implementation of encrypted data sets. This encrypted data are not possible to tamper with any persons in the transaction process (Nair & Sebastian, 2017). All the data stored in the blockchain technology can be tracked in a real-time situation which provides very much detailed audit logs. No authorization of data tampering with a detailed audit log makes it secure from any type of errors and mistakes. As the mistakes will be low this blockchain will be accepted by the most of the people in in the financial sector. Thus this technical factor of the blockchain helps with the diffusion process of the blockchain in the financial sector.
The main environmental factor on the diffusion of the blockchain technology on the financial sector:
Transaction Power Consumption:
The traditional transaction systems running on the banks require a huge amount of power to work perfectly. A recent research stated that the banks are needed three times more power to operate the transaction process compared to the blockchain transaction process (Cocco, Pinna & Marchesi, 2017). Most of the power is used by the server machines in the traditional transaction process. The adoption of the blockchain transaction process can help to reduce the power consumption for the transaction process in the financial sector. Thus this environmental factor of power consumption can help the diffusion process of the blockchain in the financial sectors.
Mining Power Consumption:
Though the transaction power cost of the digital assets is comparatively low compared to the traditional transaction process the mining process using the blockchain technology uses a huge amount of power. Blockchain technology was solely announced for the Bitcoin. The mining process of the Bitcoin consumes a huge amount of power which is not actually good for the environment which draws a negative impact of blockchain towards the environment (O’Dwyer & Malone, 2014). When the power consumption of this process is very high the financial sector will try to avoid this type of technical implementations. Thus it is a negative influence of environmental factors of the blockchain on the financial sector.
The blockchain technology can influence the decision making process in the financial sectors. In this technology, all the decision making process implemented automatically and forced by the smart contracts. This works by the decentralized system where all the decisions for the businesses are taken electronically using the blockchain which uses the smart contracts in this case. In the following section how the blockchain influence the decision making will be discussed.
Blockchain Decision Making in Permission Sets:
Contingent upon wanted access levels, blockchain data can be progressively permission. In this case, the dockworkers can be considered as an example. For instance, dockworkers could be the one level of access. Commonly the substance of a holder is not imparted to dockworkers. Dockworkers needn’t bother with this data keeping in mind the end goal to carry out their activity. Also, the security authority access can be managed by the blockchain decision making process. In this case, the blockchain technology can automatically make decisions whether to give access to some protected assets or data to an individual by accessing some information that individual (Iansiti & Lakhani, 2017). In such cases when that individual proves to be an authorised person, the blockchain can give that person early access to that assets or data before the manual verification. This process of decision making actually saves the data which is great for the financial sector. This is because only a single minute delay in a process can cause a huge loss to a company. In such way the decision making process of the blockchain providing positive influence within the financial industry.
Decision Making Process Optimization with Blockchain:
The blockchain technology is able to make the decisions on the basis of the real time data by the uses of the supply chains. The blockchain can enhance the process of the decision making at all the levels by openly sharing the information. There is real time synchronization in the blockchain technology for the decisions with the supply chain partners. As the blockchain technology uses the transparent type of transaction method, the shipments transactions of the merchant are clearly visible to the buyer (Lepri et al., 2017). So, in this case, the buyer organization can proactively make the decisions based on the supply to avoid the future problems related to it. This optimization in the decision making process helps the organization to take the correct decisions before the time. This can help the financial sectors of that organization by saving the future costs due to the future rising problems which may can occur. In this case with the optimization of the decision making the process the future problems mitigated in the preliminary stage. Thus it has a positive impact on the decision making process within the financial industry.
Real time decisions with customers using the blockchain:
The customers can be considered as a part of the supply chain management to optimize the decision making process using the blockchain. In this process of the including the customers in the supply chain, the customers will be able to track and view their orders from the stage of the production to the supply of that product in the real time (Ferrer, 2016). This can be achieved by the implementation of the blockchain technology. Whenever the customer is able to track the product shipment of own, it will automatically improve the whole process of the business and it will also strengthen the relationship with the customers. The customer will be able to give their feedbacks in the real time which can help the organization to make changes immediately. Also, the analysis of the feedbacks of the customers can help the organization to forecast the future markets (Collen et al., 2018). Predicting the future markets can help the financial sectors greatly. The services can be provided accordingly to the demands of the users which will help to boost the financial industries. Also, as the customer relationship is improving it helps the financial industries to manage more customers, which is a good indication for the financial industries. Thus this framework of the blockchain technology holds a positive influence on the decision making process in the financial industry sector.
References
Beck, R., Czepluch, J. S., Lollike, N., & Malone, S. (2016). Blockchain-the Gateway to Trust-Free Cryptographic Transactions. In ECIS (p. ResearchPaper153).
Cocco, L., Pinna, A., & Marchesi, M. (2017). Banking on blockchain: Costs savings thanks to the blockchain technology. Future Internet, 9(3), 25.
Collen, A., Nijdam, N. A., Augusto-Gonzalez, J., Katsikas, S. K., Giannoutakis, K. M., Spathoulas, G., … & Volkamer, M. (2018). Ghost-safe-guarding home IoT environments with personalised real-time risk control. In International ISCIS Security Workshop (pp. 68-78). Springer, Cham.
Farnan, N. L., Lee, A. J., Chrysanthis, P. K., & Yu, T. (2014). PAQO: Preference-aware query optimization for decentralized database systems. In Data Engineering (ICDE), 2014 IEEE 30th International Conference on (pp. 424-435). IEEE.
Ferrer, E. C. (2016). The blockchain: a new framework for robotic swarm systems. arXiv preprint arXiv:1608.00695.
Iansiti, M., & Lakhani, K. R. (2017). The truth about blockchain. Harvard Business Review, 95(1), 118-127.
Kiayias, A., & Panagiotakos, G. (2015). Speed-Security Tradeoffs in Blockchain Protocols. IACR Cryptology ePrint Archive, 2015, 1019.
Lepri, B., Staiano, J., Sangokoya, D., Letouzé, E., & Oliver, N. (2017). The tyranny of data? The bright and dark sides of data-driven decision-making for social good. In Transparent Data Mining for Big and Small Data (pp. 3-24). Springer, Cham.
Nair, G. R., & Sebastian, S. (2017). BlockChain Technology Centralised Ledger to Distributed Ledger.
O’Dwyer, K. J., & Malone, D. (2014). Bitcoin mining and its energy footprint.
Swan, M. (2015). Blockchain: Blueprint for a new economy. ” O’Reilly Media, Inc.”.
Underwood, S. (2016). Blockchain beyond bitcoin. Communications of the ACM, 59(11), 15-17.
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