Implementation of Blockchain Ledgers in Financial Institutions, Summaries of Programming Languages

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Implementation of blockchain

ledgers in the financial

institutions

Module: Language design and implementation Student: 100485625

Abstract

People have been used conventional ledgers for a very long time already. Its been with us on paper and evolved to computers. Blockchain ledgers is a novel type of ledger whose main idea is to offer better security, better privacy, faster processing and widely available. This paper is going to argument the advantages of implementing a blockchain ledger into the banking system and see what challenges this solution brings to worldwide economics.

Introduction

Blockchain technology is the ledger that gained a lot of popularity in the last decade starting with the novel way of making transactions in 2009 with Bitcoin. It is important to make the difference between blockchain and cryptocurrency. This new technology can have numerous uses outside the economic sphere because it is not just a new way of trading, it represents a new way of trust. Without implying a third party to check the data being sent it uses a software that validates the data based on purely mathematical algorithms in minutes. The big majority of banks are using conventional databases which helps them keep track of the transactions in the banking system. These databases are handled by humans on behalf of the financial institution in order to prevent double spending (the possibility to use the exact same money more than once). In other words, we can see that the efficiency of handling the money-flow can be translated in the efficiency of trust management. The more efficient an institution is, the more trustworthy it is. The implementation of blockchain technology into the banking system would bring diversity in economics and would give people a wider area of opportunities of handling their money, therefore the overall economy would be improved.

Implementation

To begin with, the purpose of blockchain technology as it was from the beginning of Bitcoin [ 1 ], was to create a financial system that is independent of any government or banking authority with better security and faster processing times. With other words, to offer the advantages of cash money into the virtual world. However, even if blockchain is independent of any bank, this does not mean that banks cannot take advantage of blockchain. Financial institutions can adopt this novel technology to improve their security since it makes the fraud computationally worthless.

Why is it more secure?

Financial institutions can adopt this novel technology to improve their security since it makes the fraud computationally worthless [ 1 ]. This means that the computational effort of hijacking the system and spend the same money more than once would cost a lot more than the winning if the fraud is succeeded. This doesn’t make the blockchain an unbreakable system, but it leaves the thieves with no reason to even try to break it. Blockchain offers the possibility of managing the money in the account without a third party which can watch your transactions. This offers more privacy for users but at the same time it can represent the freedom for bad intended people to scam the honest users. This is because Bitcoin is a permissionless blockchain which means everyone who is willing to create an account can join the blockchain and make transactions. Even if the system is not worth to be hacked, scams can still exist outside the system and one way to prevent that is the transition from permissionless blockchain to permissioned

could bring back those money spent on a scam service or buying a fake product if the one person who received the money is not willing to return them.

How can it be prevented?

There are already software solutions to prevent this kind of issues[ 11 ][ 12 ][ 13 ], but none of them can guarantee prevention. However, they can still minimize the risk of bad situations and protect the majority of customers. The best solution for implementing blockchain into the financial system for the beginning is to be adopted as an extra service for loyal customers, wealthy people, and people with good credit scores that have something to lose if they do something illegal in the blockchain system. If a person that has all its finances on blockchain is caught or is claimed to do something illegal, then the law will have no power over the immutable system and will be literally unable to recover the victim losses.

Conclusion

With this said, technology can improve the actual finances from all around the world by using the blockchain ledgers, the benefits are not to be ignored even if the implementation could be difficult. Even in this situation it is critical to not neglect the possible disasters that could happen if the implementation is not done right. It can help us as a society to make a big step forward in finances but we still need to be careful.

References

[1] - Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System” [ 2 ] - T. Mitani and A. Otsuka, "Traceability in Permissioned Blockchain," 2019 IEEE International Conference on Blockchain (Blockchain) , Atlanta, GA, USA, 2019, pp. 286-293, doi: 10.1109/Blockchain.2019. [ 3 ] - B. Putz and G. Pernul, "Detecting Blockchain Security Threats," 2020 IEEE International Conference on Blockchain (Blockchain) , Rhodes, Greece, 2020, pp. 313-320, doi: 10.1109/Blockchain50366.2020.00046. [ 4 ] - K. Wüst and A. Gervais, "Do you Need a Blockchain?," 2018 Crypto Valley Conference on Blockchain Technology (CVCBT) , Zug, Switzerland, 2018, pp. 45-54, doi: 10.1109/CVCBT.2018.00011. [ 5 ] - https://www.fool.com/investing/2018/05/23/ranking-the-average-transaction-speeds-of-the- 15 - l.aspx [ 6 ] - K. Wang and H. S. Kim, "FastChain: Scaling Blockchain System with Informed Neighbor Selection," 2019 IEEE International Conference on Blockchain (Blockchain) , Atlanta, GA, USA, 2019, pp. 376 - 383, doi: 10.1109/Blockchain.2019.00058. [ 7 ] - https://ripple.com/customer-case-study/santander/ [ 8 ]- https://courses.lumenlearning.com/macroeconomics/chapter/the-role-of-banks/ [ 9 ] - https://www.economicshelp.org/blog/glossary/banks/ [1 0 ] - S. Malik, V. Dedeoglu, S. S. Kanhere and R. Jurdak, "TrustChain: Trust Management in Blockchain and IoT Supported Supply Chains," 2019 IEEE International Conference on Blockchain (Blockchain) , Atlanta, GA, USA, 2019, pp. 184-193, doi: 10.1109/Blockchain.2019.00032. [ 11 ] - T. Salman, R. Jain and L. Gupta, "A Reputation Management Framework for Knowledge-Based and Probabilistic Blockchains," 2019 IEEE International Conference on Blockchain (Blockchain) , Atlanta, GA, USA, 2019, pp. 520-527, doi: 10.1109/Blockchain.2019.00078. [ 12 ] - S. Sahai, N. Singh and P. Dayama, "Enabling Privacy and Traceability in Supply Chains using Blockchain and Zero Knowledge Proofs," 2020 IEEE International Conference on Blockchain (Blockchain) , Rhodes, Greece, 2020, pp. 134-143, doi: 10.1109/Blockchain50366.2020.00024. [ 13 ] - T. Salman, R. Jain and L. Gupta, "Probabilistic Blockchains: A Blockchain Paradigm for Collaborative Decision-Making," 2018 9th IEEE Annual Ubiquitous Computing, Electronics & Mobile Communication Conference (UEMCON) , New York, NY, USA, 2018, pp. 457-465, doi: 10.1109/UEMCON.2018.8796512.