“Bankchain,” an appropriately named blockchain project, is slated to have its beta launch within the following month by State Bank of India (SBI). The platform will support smart contracts, to begin with, but will eventually also move on to support Know Your Customer (KYC) in the future.
What initially started out as a small project involving only SBI, now has 27 other banks as part of it. Several big names, including ICICI Bank and Axis bank, are on the list. Primechain Technologies, a startup devoted to working on blockchain technology, is responsible for achieving the technical requirements of this project.
Smart contracts, while ambiguous by name, are a relatively simple concept. They are traditional contracts that can be accounted for on the blockchain. Since a blockchain is an immutable record, a contract, once signed, cannot be modified by either party. Further, contracts will have greater accountability and credibility since they can be tracked easily. The application of smart contracts can be found for small settlements, for instance, a non-disclosure agreement.
Supporting Know Your Customer on a blockchain will also have a profound effect on the current infrastructure. Customer details can be potentially stored in a more securely than ever before.
This announcement comes just months after the Reserve Bank of India (RBI) hinted towards having interest in integrating a blockchain with the traditional pillars of banking.
The blockchain is a relatively new technology that has found popularity due to cryptocurrencies such as Ethereum and Bitcoin. For these digital currencies, the blockchain acts as a distributed ledger that accounts for transactions in a tamper and hack-resistant fashion. While usage of Bitcoin and presumably other similar currencies are discouraged by the RBI, it hasn’t stopped banks from taking a page or two from their book.
In 2017, bitcoin has seen a 700 percent increase, inviting speculation of regulation by the RBI. While no formal ban was ever issued on digital currencies, the country warns its citizens of possible fraud while dealing with them.
Blockchain technology is fundamentally designed to work without a central governing body. This decentralization further benefits smart contracts since every copy of the blockchain would be able to corroborate the details of the contract.
Banks do not wish to stop at adopting upcoming technologies with this blockchain venture though. SBI is reportedly looking into other emergent engineering solutions, including Machine Learning and Artificial Intelligence to augment the current banking ecosystem. With the aim of improved analytics and data collection, SBI will fund and incubate several new startups in these fields at their innovation centre in Navi Mumbai.
India is not the only entity looking forward to the banking revolution due to the blockchain. Even the countries that drove out cryptocurrencies are now beginning to adopt the technology, with the most obvious example being China. This should come as no surprise since the blockchain’s benefits are currently unrivaled. Even VISA and MasterCard have developed internal blockchains to facilitate overseas and B2B transactions. It will not be long before they allow the general public to access them.
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