Last year, ICICI Bank announced that it successfully performed transactions in international trade finance and remittances using blockchain technology in partnership with a Dubai based bank Emirates NBD.

In 2008, a cryptographer created a cryptocurrency called bitcoin. Bitcoin is digital currency that allows you to perform peer-to-peer transactions without the help of a third party such as banks


Although the keenness around Bitcoin dwindled after several governments refused to concede the crypto-currency, but the underlying technology of blockchain has been hailed by the banking sector

What is blockchain technology?

A blockchain is an anonymous online ledger that uses data structure to simplify the way we transact. Blockchain permit users to manipulate the ledger in a secure way without the help of a third party. A bank's ledger is connected to a centralized network. However, a blockchain is anonymous, protecting the identities of the users. This makes blockchain a more secure way to carry out transactions. The algorithm used in blockchain minimizes the dependence on people to verify the transactions. This technology used for recording various transactions has the possibility to disrupt the financial system.

How it works?

According to Sunny Ray, Co-founder and President of India's leading bitcoin blockchain company, Unocoin, "blockchain enables two entities that do not know each other to agree that something is true without the necessity of a third party’s intervention. As against to writing entries into a single sheet of paper, a blockchain is a distributed database that takes a number of inputs and places them into a block. Each block is then 'chained' to the next block using a cryptographic signature. This allows blockchains to be used as a ledger which is accessible by anyone with authorization to do so.

Why are banks interested?

All major banks are carrying out trials with blockchain as they can use it for money transfers, record keeping and other back-end functions. The blockchain application duplicates the paper-intensive international trade finance process as an electronic decentralized ledger that gives all the participating entities, including banks, the ability to access a single source of information.

It also enables them to track documentation and validate ownership of assets digitally, as an unalterable ledger in real time. Indian IT service providers like Infosys and TCS are increasingly incorporating the usage of blockchain technology. Both these companies are using blockchain mechanism to create core banking platforms for banks.

Where can it be used?

Use of blockchain technology is not confined to the financial sector. It is being used in many other areas. For example, Honduras government has put all land records on a public ledger - the blockchain. The minute there is a change in ownership, it gets recorded publicly. The Australian Securities Exchange (ASX) announced this year that it would migrate Australia's equities clearing and settlement system onto blockchain

In October 2015, Nasdaq unleashed Linq, a solution enabling private companies to digitally represent share ownership using blockchain-based technology.

Is it safe?

The USP of blockchain is that it permits two parties to execute a transaction without any intermediary. Blockchain allows financial institutions to execute and validate transactions discretely without any human intervention.


The electronic ledger of transactions is continuously maintained and verified in 'blocks' of records. With the help of cryptography, the tamper-proof ledger is shared between parties on computer servers. Experts believe that blockchain architecture can significantly bring down the costs and improve efficiencies in the financial sector.