Remittance can be defined as transferring money to a remote location, usually between people living in different countries. While remittance has several benefits of Blockchain for the developed countries, developing or under-developed countries are the real profit makers. Third-world countries have seen a major boost in the economy due to the large flow of money in the form of remittance. This income surpasses foreign direct investments and official development assistance in many countries. As their economies highly depend on the cash transferred from abroad of peer-to-peer money

Blockchain is being integrated into many industrial and business domains. It provides solutions for different real-life problems. Being an efficient Distributed Ledger Technology (DLT). It can be the foundation of a new cross-border payment system capable of solving inefficiencies and offering a quicker, more reliable, and more accessible service. Let’s discuss the benefits of blockchain and cryptocurrency for money transactions. Moreover, explore what are the issues it is currently facing.

But, before we get into assessing the technology and its impact in the world of banking and more specifically the transaction of money. We need to understand what technology is all about and what makes it so unique.

Blockchain Technology

While the concept may seem a bit too complicated. It’s actually quite simple (or will seem simple as we further explore it).
 
Simply put, a blockchain is a type of database i.e. a collection of information stored electronically on a computer system or in this case, on multiple connected computer systems.
 

A database design to specifically hold larger amounts of information that is not only accessible but also filters and manipulates by multiple users at once. Large databases are available by housing data on servers that consist of multiple hundreds or even thousands of computers. Housing data on such a large number of computers provides it with the computational power and storage capacity that enables simultaneous access to users.

Scoping The Future Benefits Of Blockchain Technology

Blockchain Vs Database

A blockchain collates information in groups, that are also known as blocks. Each block has its specific capacity. When those capacities fill up, they are ‘chained’ onto previously filled blocks. Therefore, creating a chain of data known as “blockchain”. This process continues with more addition of fresh blocks and older ones chained to previously filled up blocks.

Since we’re talking about blockchain. We need to dive into the process of the transaction and all that it entails.

Transaction Process

The first step is obviously the entering of a new transaction. That immediately transmits to a network of peer-to-peer computers, scattering across the world.
 
Once the transaction passes to the network of computers. The devices begin to solve complex equations to confirm the validity of the transaction. It also ensures a legitimate and safe transaction.
 
After the establishment of legitimacy. The transactions are clustered together into blocks i.e. storage spaces. These blocks then chain together and add to an already existing history of transactions. Therefore, making the entire database permanent and completing the transaction.
 
But wait, what kind of transactions does blockchain even store? Mostly it stores cryptocurrency transaction history, but can also hold other things such as product inventories and legal contracts – again, depending on the needs of the organization.

Blockchain For Cryptocurrency

We know that cryptocurrency has intrinsic value, and is a rather fast way to transfer value for little or no cost. This currency even has no physical form. Since it exists only on the immutable blockchain and its supply decision is not a central bank, but members of the decentralized network that it exists on.
 
It is this decentralization that makes blockchain and its relationship with cryptocurrency such an interesting case to view.
 
In the case of blockchain for cryptocurrency, all of the data is available in separate computers spread across geographical locations. With each holding huge amounts of data and being operated by separate individuals/groups of people.
 
This decentralization is also what adds to the transparency that is present within the blockchain system. Since these transactions stores permanently. The views are transparent and every transaction traces back to its origins while also identifying the history.

Blockchain For Banking

Through instituting a decentralized database, blockchain can provide a wide range of financial services without actually needing a bank.
 
This is not only in the case of easing/providing a system of transactions. Also, it can institute self-executing contracts that can potentially automate manual processes such as compliance and claims processing.
 
With the decentralized ledger, blockchain can help facilitate faster and more secure payments at a substantially lower cost than traditional banks. This is something we’ll look at in detail later on.
 
One unique use is the ability to introduce a new model of financing that can help to raise capital through initial coin offerings. This offers a different model in comparison to traditional capital-raising services/firms.
 
Moreover, by removing gatekeepers in the loan/credit industry. Blockchain could also provide a much more secure platform to borrow money at lower interest rates even.
 
However, we’ll try to focus on one of the main uses of blockchain in the banking industry. Which are the benefits it could provide when it comes to remittances.

Benefits Of Blockchain For Remittances

Blockchain, if incorporated in the global remittance industry, can produce wonderful solutions to third-world problems and help people working overseas send money to their families easily. The following are some of the advantages of blockchain technology.

Swift Payment Process

Blockchain technology will speed up and simplify cross-border transfers by taking out conventional middlemen, making remittances feasible and more accessible. The current remittance process is highly inefficient and costly for the general public. While the traditional method takes eight to nine steps before money finally reaches the receiver. Blockchain simplifies the process within four to five easy steps. Therefore, if you delve deeper, it makes perfect sense that blockchain and cryptocurrencies are there to disrupt the existing system of remittances, which is hugely unfair and inefficient.

Efficient and Reliable

Blockchain innovation can be expensive as a relatively new and developing technology. However, considering that global annual remittance transactions might exceed $1 trillion by 2022. We see an enormous potential impact of blockchain here. Improvements in upload rates and lower fees will have a real impact on hundreds of millions of people’s well-being. Transferring money through old means results in huge losses in the forms of fees and taxes at every step, thus decreasing the overall efficiency of the process.

Lots of Use Cases

Blockchain is there to do transactions through various mediums and devices, mobile phones, digital systems, and ATMs being the major ones. 

To deliver new payment mechanisms, several businesses are now working with blockchain technology. Some mobile crypto-wallets enable users worldwide to send and receive digital payments. The combination of blockchain ledgers and ATMs can reduce the need for intermediaries and middlemen significantly. Users will not even need a bank account, and they will have to pay a very small amount to ATM companies during the process.

 

Conclusion:

The advantages of Blockchain are many and so are the problems in the way of its development. The biggest one is the regulation of blockchain technology by governments. The non-availability of internet services in the backward areas remains an issue. But we are sure that as this technology becomes stronger, it will certainly grow past these issues. benefits of blockchain and cryptocurrency for money transactions.

At the end of the day, this technology offers an environment that is not only secure but offers a unique and exciting way to embark on new methods of payments and transactions that have the potential to change the landscape of money as we know it.