Intermediaries must obtain consent to process payments, market goods and services, provide credit services, provide insurance products, and perform regulatory compliance work.
You can read this page to get complete knowledge about these machines.
Bitcoin has shown promise as a disruptive technology that may replace the need for intermediaries in mainstream finance and tech sectors due to its unique features such as built-in incentives (such as fees), low transaction fees, high scalability capacity that allows transactions with low processing fees, global accessibility through computers around the world networked together with blockchain technology or decentralized ledgers.
But what about the legacy financial and tech industries?
Bitcoin and blockchain are still in infancy:
Blockchain technology is still immature, and its lack of global reach prevents widespread use.
However, many of the financial services products currently offered by banks require a global footprint on an average daily basis.
For example, traditional transactional banking products include payment services, money transfer services, credit card processing, international money transfers, securities settlement services (e.g. trading on exchange), foreign exchange and commodities trading.
Traditional IT software concerns brokerage investment products such as stocks and bonds, investment management of mutual funds and hedge funds, investments in real estate through mortgages and property development finance programs etc.
From the technology perspective, tech products that are currently being developed and implemented include the trend of mobile applications for in-store inventory management, point of sale terminals (i.e. barcode scanning), automated teller machines (ATMs), ATM card technologies that are embedded with e-payment capabilities and real trading platforms.
In addition, banks and financial service providers already use vast amounts of legacy infrastructure in compliance with AML/CFT policies and regulations.
Technology is evolving at a fast pace across various industries today.
Still, as seen in this example, it may not be as seamless for finance and tech sectors to adopt new disruptive technology like blockchain.
Moreover, the user will likely vary the results of this adoption; for example, banks could benefit by using blockchain technology to issue digital tokens that represent the value of the bank’s assets (e.g., a token issued by Visa and linked to fiat currency).
Similarly, banks today already invest more than $7 billion annually in R&D for projects predicted to help them digitize their operations and cut costs (e.g., cloud-based software based on artificial intelligence that allows for real-time digital asset generation).
Removing intermediaries from finance:
As blockchain and bitcoin technology evolve, the financial industry will likely begin to explore various use cases.
For example, the intermediation process can be removed using decentralized ledgers because they allow for self-executing smart contracts, meaning that contracts can execute themselves based on programmable rules without needing a third party to approve the transaction.
The financial industry has already explored self-executing intelligent contracts in idea products such as the Ethereum-based Smart Contracts.
The critical question remains: Will intermediaries still be needed in mainstream finance?
Intermediaries are necessary for mainstream finance:
Many examples show how intermediaries serve a crucial role in mainstream finance.
For example, in capital markets, intermediaries serve as gatekeepers for investors, brokers and funds.
Banks are intermediaries in the interest rate market used to set short-term financial instruments such as bank loans at market rates.
Banks also act as intermediaries in foreign exchange markets, the most liquid financial markets in the world.
Banks also provide credit services to individual customers, offering loans and credit card lines that replace traditional bank deposits and mortgages.
Transactional banking is one of the two main pillars of banking, accounting for about 75% of the industry’s revenues.
The other pillar is investment banking, accounting for the remaining 25% of the industry’s revenues.
This example of blockchain-based solutions could disrupt the finance industry: By using a peer-to-peer (P2P) platform such as ethereum, financial market participants can trade directly without going through intermediaries, saving time and reducing fees.
Is bitcoin the future of digital transactions?
Bitcoin and blockchain do not exist in the traditional sense: The bitcoin currency is a commodity based on tangible world assets.
However, it is a commodity that is digital and global.
The new global financial framework that emerges from a digital transaction system could enable billions of people to be connected to markets, services and investment opportunities without third-party involvement.
The technology also allows for new business models such as peer-to-peer money transfer services where funds in different countries can be transferred directly from one person to another anywhere in the world.