In the modern era, companies have been increasingly outsourcing their financial management, including accounting processes and systems. For example, you can check this site to get an automated trading experience by accessing the best-in-class trading bots and strategies. However, it has made it impossible to ensure that the local accountants (in particular) handle everything in compliance with local laws, regulations or best practices.
The below-mentioned will explore how users could use blockchain technology to replace internal cash management functions, including accounting services and procedures. ICOs, crypto-assets and blockchains provide an all-inclusive solution for companies looking for a more sustainable way of managing their finances. They also help legitimize crypto-finance as a new industry that can provide increased transparency and validity compared to traditional banking methods. Overview of Problems
Blockchain Technology Offers a Solution
To begin with, it is essential to highlight the core problems within the centralized financial systems currently in use. The following will provide a brief overview of a few major problem areas.
How blockchain removes reliance upon accountants?
In the current economic system, accounting records have been outsourced to third-party accountants, who maintain and create records on behalf of various businesses. Several companies have started to delocalize their accounting and cash management services, handing these over to companies with more technical expertise, such as banks or payment providers, to ensure more excellent reliability, speed and trustworthiness. Delocalized accounting has increased over the past few years, tripling in size from 2017-2022.
This practice has created a severe problem, as most accountants are still trying to use old methods and systems designed for small businesses or individuals. However, blockchain technology is quickly becoming a new industry with tremendous potential, thanks to the fact that it provides a secure and straightforward way of handling transactions and maintaining records.
The blockchain removes the need for a centralized ledger, as transactions are distributed across multiple nodes within the network, which means that all information is stored in a distributed manner – this makes it incredibly difficult for hackers to gain access to any single node or piece of information. In addition, blockchain technology is programmed to automatically create backups of each transaction and maintain a complete history of every single activity completed within the system.
The Biggest Problem Areas Within The Current Financial System Include:
- Centralized Control
The financial system currently in use is centralized; large banks hold all the money, account for it and keep track of it. It is a serious concern because it creates a single point of failure and makes it easier for hackers to target only one entity to gain access to billions of dollars worth of assets.
- Slow, Costly and Outdated Practices
This system is incredibly slow and costly for all organizations that are involved, from the banks themselves (who spend exorbitant amounts of money on maintaining their servers) down to the consumers themselves, who are constantly paying fees for wire transfers, deposits/withdrawals (or even sometimes having their accounts locked).
- Lack of Internationalization
The financial system cannot provide solid bank relationships with overseas branches and countries. It is because it confines itself within a single region of the world and completely ignores areas such as the Asia-Pacific, which has become one of the most dynamic areas for global economics. Completely cutting off your base in this area can be a severe issue for any industry looking to expand its global footprint and reach.
- Centralized Control & User Authentication (Mostly) Comes From One Source
For users who wish to interact with their banking services, they are required to utilize one unified identification system that provides access to both financial services and other systems as well.
How can blockchain resolve these problems?
- Decentralized Control
With blockchain technology, all transactions could take place without any single entity having control over any other – this means that all of the transaction details, account balances, and transaction history will always be 100% public and transparent.
- Lower Fees & Costs
Blockchain technology should significantly lower the costs of all banks and companies who use it because it eliminates the need for centralized systems or servers, which are currently responsible for costing upwards of $60,000+ per month in maintenance costs.
- Global Banking Relationship Management
Countries worldwide have started looking into utilizing blockchain technology to create better ties with their global counterparts across borders. It is made possible through cryptocurrency, as blockchain technology offers a means of quickly and easily transferring funds internationally with the assistance of straightforward digital wallets.
- Universal User Identification
The process of communicating, verifying and authenticating user identities becomes significantly more straightforward with blockchain technology. The user’s unique code/pin becomes their primary means of identifying themselves to banks, other financial institutions and any other organization they may wish to interact with.
- Greater User Privacy & Control
All users have complete control over their identity data, and all information shared within the system is stored transparently, making it easier for users to keep track of personal details such as their credit history or bank account numbers.