Enquire now for CA in Delhi


Written by SHUBHAM SRIVASTAVA Dt. September 27th, 2022

In layman language, Block chain is series of immutable data records that is time stamped and not owned by any single entity or person but rather managed by information technology i.e. by computer systems, each block is linked with others using cryptographic principles and each one is secured as well.
Block chain sometimes also known as Distributed Ledger Technology (DLT), peer to peer, shared and decentralized open ledger of transactions system with no any authorities/party in between. This decentralized network refers to the network which is not controlled any bank, corporation , even not controlled by any govt. in short it is a public ledger capable of recording the origin, movement, and transfer of anything of value.
This is a permanent type of ledger database that has every entry as permanent, no entry can be altered or changed means all entries are irreversible with any change in the transaction being recorded as new transaction .Each block in the chain represents the digital information stored in public database.

Let us understand the working of block chain by taking an example of the sending money to someone online

  • Transaction is broadcasted via the network.
  • Network validate the transaction using cryptography.
  • The transaction is represented online as block.
  • Block is added to the existing block chain.
  • In this way the transaction is completed.

Block chain is having wide application in various industries like healthcare, travel industry, economic forecasts, etc. Same way it is very useful and having variety of application in financial industries as well and block chain is having the capability to revolutionize the financial industry. Some of the applications are discussed below:-

  • Digital identity verification
  • Smart contracts
  • Simplified payment processing
  • Cross border transaction
  • Trading and investment
  • Lets us discuss them one by one
  • Digital identity verification
    Now-a-days banks and other financial institution identify their customer by the data stored in their server which can be altered by employees, hackers and fraudsters with MAL intentions, using block chain banks and other financial institutions can identify individual by using block chain enabled IDs such information cannot be altered. When consumer data is secured using block chain, banks can increase public trust while protecting against fraud and this can speed up verification process as well.
  • Smart contracts
    This is one of the most impactful application of block chain in finance because of its ability of establishing trust. Smart contracts are like physical contracts, except the stipulations of the contract are fulfilled in real time using block chain. These contracts are fulfilled instantly after all stipulations are met, do not require any middlemen and any high level of security. Smart contracts are nowadays at the top of everyone need because of its efficiency and privacy.
  • Simplified payment processing
    In finance industry one of the most attractive application of block chain is its ability to process payments instantly along with maintaining the integrity of data. It is because the basis of block chain is peer to peer removing all the central authority or middleman in between, it is as simple as touch the screen of your smart phone. When such transaction are initiated the nodes of DLT unanimously either accept or reject the payment instantly. By using the block chain for money transfer both bank and customer can save reasonable amount of time as well as money. Block chain based currencies are also available means there is no exchange rates and difficult country to country by laws.
  • Cross border transactions
    Cross border transactions has traditionally been slow and expensive, since it went through multiple banks or financial institution to its way to the destination, when used for the cross border block chain can make process faster, more accurate, and less expensive.
  • Trading and investment
    DLT has capability to transform the stock market to different level by cutting down the complicated and time-consuming process, high cost and security risks. Stock market has numerous player including investors, brokers, banks, regulatory agencies and centralized government based institution processing the investments due to which it takes T+2 days to clear the settlement, blockchain promises to bring speed, accuracy and efficiency to the trading and investment process. Blockchain has also introduced another investment opportunity in the way of coins. These coins are digital currency which represents ownership in the company offering it. These currencies can be used in day to day life as well.


  • Affordability: – Shifting to blockchain technology is an expensive and time consuming process because of lack of skilled developers.
  • Relatively new:- It is still in development phase there are many hurdles to overcome with ongoing amendment . Govt. might need to make/amend rules and policy regarding monitor and use of it.
  • Lack of interoperability: – at present moment of time block chains aren’t able to make and exchange communication with other block chains. As a result there is no communication between them.

From above we can conclude that the financial industry can also be revolutionize by using block chain. The Bitcoin is the first successful implementation of block chain. Today, the world has found applications of block chain technology in several industries, where the trust without the involvement of a centralized authority is desired.
However, block chain involved few risk which can be mitigated by using proper controls like Govt. can make a body which do not interfere but oversee its operation that can build trust among individuals and also by proper education of block chain process its importance, its benefit, risks involved and its controls can be added to the curriculum. The day is not so far when finance is fully automated and safe.

Written by
Articled Clerk

© G. K. Kedia & Co. | All Rights Reserved | Powered by Januskoncepts