Risk Of Implementing Block Chain In The Finance Industry - Samples

Question: Discuss about the Risk Of Implementing Block Chain In The Finance Industry. Answer: Introduction Blockchain technologies are the emerging technologies in the word. The market of the blockchain technology has been rising in the market at a decent speed. However, there are various risks involved in the technology. This report focuses on identifying the risk involved in the blockchain technologies in the finance industry. The report outlines the risks assessment procedure in the finance industry. A risk assessment procedure has been discussed in the report for mitigating these issues in the finance industry due to blockchain technology. Blockchain technology According to Zheng, Xie and Wang (2016), blockchain is a digital innovation in the market that is using the concept of the cryptography, networking, data management and incentive mechanism in order to maintain the financial database of different companies in the market. This technology has helped in initiating digital currency transfer between parties. Blockchain has been originated from the bitcoins digital currency. This technology has been implemented in the finance industry in recent years. Figure 1: Blockchain Market in 2017 (Source: Lindman, Tuunainen and Rossi 2017) The market of the blockchain has been rising all over the world due to its capability of digital transfer of virtual currency. As commented by Guo and Liang (2016), blockchain has been regarded as the distributed ledger technology (DLT) that helps in distributing financial assets between parties. As argued by Crosby et al. (2016), this technology has been credited with the highest risks involvement of the finance industry. The virtual currency has no record in the database and a third party vendor to store the information of the parties. According to a survey, over 90 corporations have implemented filed more than 2500 patents against blockchain technology all over the world. Risks and Threats: Regulatory and governance As commented by Lindman, Tuunainen and Rossi (2017), there is a lack of regulatory clarity in the blockchain technology. The regulatory framework of the block Chain technology has been weak including the private network of the parties. The privacy of the parties included in the blockchain technology has been facing various security breaches over the internet. The hackers all over the world are targeting these online transfers of digital currency among the parties. The counter Clearing house and Product (CCP) has been regulating these transaction al over the world. However, these organizations are not safe for the online transaction of digital currency. Privacy and Security As commented by Swan (2015), the use of the block chains haes been emerging all over the world. The privacy and security of the financial documents and assets have not been maintained by the technology. There have been numerous cases of hacking and data breaching over the internet that has been reported. Blockchain uses a shared database that contains all data and information of various parties. As commented by Mougayar (2016), this technology provides a high-speed transfer of digital currency. Crosby et al. (2016) argued that, this concept has minimized privacy and security of data and information of the parties involved in the contract. Therefore, this technology has high-level risks in the finance industry. Behavioural and transactional risks As commented by Lindman, Tuunainen and Rossi (2017), transactions in the blockchain technology have been a huge risks for the investors. The finance industry has been facing a lot of loss in the market due not the technology. However, According to me, blockchain need to use a centralized database instead of the shared database. The firewall of the technology has been weak. This has caused the variety of cyber-attacks in the database. The lack of the third party investors has created problems for the investors, as there is no part for tracking their financial assets. As commented by Guo and Liang (2016), blockchain is not storing the Big Data technology. According to me, adoption of Big Data technology might help in minimizing these risks and threats in the blockchain. The massive redundancy of the technology has been creating issues in the security of financial data and information of the companies. As commented by Swan (2015), instead of storing data on the blockchain, a metadata can be created for maintaining the record of the parties involved. As commented by Guo and Liang (2016), this can ensure an integrity checking if the data and information provided in the metadata. Conclusion It can be concluded that the use of the blockchain technology has helped in increasing the speed of transaction all over the world. However, it has created various risks and threats in the transaction that have been discussed in the report. The use of blockchain technology has been originated from the bitcoins. The market of the Bitcoins has been adopted by various financial companies in the world. References Crosby, M., Pattanayak, P., Verma, S. and Kalyanaraman, V., 2016. Blockchain technology: Beyond bitcoin.Applied Innovation,2, pp.6-10. Guo, Y. and Liang, C., 2016. Blockchain application and outlook in the banking industry.Financial Innovation,2(1), p.24. Lindman, J., Tuunainen, V.K. and Rossi, M., 2017. Opportunities and risks of Blockchain Technologiesa research agenda. Mougayar, W., 2016.The business blockchain: promise, practice, and application of the next Internet technology. John Wiley Sons. Swan, M., 2015.Blockchain: Blueprint for a new economy. " O'Reilly Media, Inc.". Zheng, Z., Xie, S., Dai, H.N. and Wang, H., 2016. Blockchain challenges and opportunities: A survey.Work Pap.2016.