Blockchain in Finance: What It Is and How It’s Used

These companies apply blockchain in finance to help the banking and finance industries find their stride.

Written by Sam Daley
Blockchain in Finance: What It Is and How It’s Used
Image: Shutterstock
UPDATED BY
Matthew Urwin | May 22, 2024

It makes sense that blockchain technology was first introduced as a way to breathe some fresh air into the financial sector. Originally created at the height of the 2008 global financial crisis as the operational backbone of Bitcoin, blockchain’s distributed ledger technology is a safe and secure method to transfer and catalog data.

In short, blockchain is a public ledger capable of recording the origin, movement and transfer of anything of value. Instead of relying on a central authority, like banks, blockchain requires unanimous approval from the individual nodes in the blockchain to process a payment or transfer a good. The ledger technology is most attractive to the financial sector because it solves many problems plaguing the industry today, namely security and efficiency.

Blockchain in Finance Examples

  • Smart contracts
  • Simplified payment processing
  • Advanced trading and investing
  • Loyalty and rewards programs
  • Upgraded digital identity management

Blockchain subverts institutions in a way that makes today’s current financial industry appear archaic, so it’s no surprise the powers that be in the world of finance are looking for their seat at the table. DLT technology has the potential to expand the global economy to $1.76 trillion by 2030, and this possibility has risen with the popularity of blockchain wallets and cryptocurrencies. 

The word “disruptive” is used all too frequently nowadays, especially in the technology space, but blockchain truly has the ability to shake the multi-trillion dollar financial industry to its core. 

Here are just a few examples of blockchain in the finance sector doing just that.

Companies Using Blockchain in Finance

  • OpenZeppelin
  • Propy Inc
  • Uulala
  • SoluLab
  • Ripple
  • Mastercard
  • Veem
  • MakerDao
  • Robinhood
  • Public.com

 

Smart Contracts on Blockchain

Arguably the most impactful application of blockchain in finance is its ability to efficiently establish trust through smart contracts.

Smart contracts are similar to physical contracts, except the stipulations of the contract are fulfilled in real time via the blockchain. Smart contracts are beneficial, especially to the finance sector, for numerous reasons. These contracts are fulfilled instantly after all stipulations are met, do not require any middlemen and add heightened levels of security.

Jeff Garzik, co-founder of blockchain company Bloq, says smart contracts are beneficial to parties looking for very specific outcomes, such as when a contract is fulfilled by both parties following all the predetermined rules and dissolves under violations. A good example of this is investing.

When an individual invests in a company, the rules and stipulations are clearly established between the two parties. The unambiguous nature of the contract is helpful because the blockchain can then enforce those rules using its network of computers to check that all contractual agreements have been met (i.e., the investor has enough money, they invested in the proper amount of shares, etc.) before the investment moves forward.

Smart contract technology is currently at the top of almost everyone’s needs because of its efficiency and privacy. Here are companies instituting blockchain-based smart contracts in an effort to get ahead of the curve.

 

Founded: 2017

Location: Fully remote

Chainlink Labs is a Web3 services platform that works to enhance smart contracts by connecting them to off-chain data sources. The company is the developer of Chainlink, an enterprise-grade oracle infrastructure that helps financial institutions connect their existing systems to major blockchain networks.

 

Founded: 2015

Location: San Francisco, California

OpenZeppelin builds and operates blockchain-based infrastructure for smart contract systems. The company blends easy-to-understand code with strict contract security practices to give customers a frictionless experience. The company has implemented systems for a slew of industries, including everything from social media to the financial sector.

 

Founded: 2015 

Location: Palo Alto, California 

Propy streamlines the real estate industry with its transaction management platform and blockchain technology. The company’s platform eliminates the need for piles of paperwork while providing a single system for handling the entire real estate transaction process. For property titles and escrows, smart contracts offer a frictionless experience while reducing the possibility of wire fraud and other threats.

 

Founded: 2017

Location: Fully Remote

Uulala is using smart contracts for bill paying, micro-credit and micro-loan agreements to serve underserved populations in the Americas. The company provides these consumers with a virtual blockchain-based wallet and rewards those who pay their bills or fulfill the stipulations of their smart contract micro-loans in virtual currency. The ultimate goal of Uulala is to help these consumers get recognized as creditworthy by larger financial companies.

 

Founded: 2014 

Location: Fully Remote 

SoluLab matches organizations with the appropriate blockchain developers, and the company has made the process even smoother with smart contracts. With expertise in developing and auditing smart contracts, SoluLab personalizes blockchain-based contracts for private, hybrid and public platforms. Businesses can then craft ideal smart contracts that meet their energy and security standards.

Related Reading34 Blockchain Applications and Real-World Use Cases Disrupting the Status Quo

 

Blockchain Payment Processing

One of the most attractive applications of blockchain in fintech is its ability to process payments almost instantaneously and in a manner that protects data integrity.

Because the basis of DLT is to bypass centralized institutions, moving money from peer-to-peer is as simple as pressing a “send” button on a phone. Once initiated, the nodes in the blockchain work to unanimously accept or deny the payment in an instant. There’s no need for cash to sit in limbo for days while the bank processes the transaction, nor is it burdened by exorbitant fees.

By conducting money transfers with blockchain, both customers and banks could save an unprecedented amount of time and money. Blockchain-based currencies are also universal, meaning there are no exchange rates, international transfer fees or confusing country-by-country laws that prohibit the transfer of cryptos.

Here are a few examples of companies using blockchain to shake up the payments industry.

 

Founded: 1799

Location: New York, New York

JPMorgan Chase is a global financial services firm that offers blockchain solutions for fintechs and financial institutions through its Onyx brand. Its offerings include Liink, a peer-to-peer network that facilitates secure data exchanges, and blockchain-based infrastructure for domestic and cross-border payments.

 

Founded: 2012

Location: San Francisco, California

Ripple is one of the best-known blockchain-based payment systems. The technology lets banks, corporations and cryptocurrency exchanges transfer money directly without the need for a third-party processor. With personalized integrations, the ability to track payments and the elimination of middlemen, Ripple is facilitating the efficient transfer of money around the world.

 

Founded: 1966

Location: Purchase, New York

Credit card giant Mastercard showcases patented blockchain technology that processes cryptocurrency payments on traditional credit card systems. The company realizes that blockchain-based payments are getting popular and wants customers to retain anonymity, while maintaining the speed of an already established payment infrastructure. Mastercard also aims to cut down on fraud and risk with a hybrid payment method.

 

Founded: 2014 

Location: San Francisco, California 

Veem supports customers with a platform that makes it easy to complete payments in various formats, including bank accounts, credit cards and blockchain currencies. Each transaction requires as little as an email address and notifies all parties involved. The company also meets all licensing standards in its active countries and states, blending efficiency with added peace of mind.

 

Founded: 2014

Location: San Francisco, California

MakerDao understands that making the transfer of money easier requires more stability in the cryptocurrency market. The company is a decentralized organization on the Ethereum blockchain that seeks to minimize its own volatility against the U.S. dollar by encouraging trading and borrowing of its Dai coin.

Six ways blockchain can be used in financial services. | Video: Bython Media

 

Blockchain Trading

Blockchain technology has the capability to transform the stock market by cutting down complicated and time-consuming processes, high costs and security risks.

A traditional stock market has numerous players, including investors, brokers, regulatory agencies and the centralized institution processing the investments. An investment can take up to three days to process because of communication between intermediaries, causing lag and uncertainty in the process. Blockchain, featuring smart contracts and a decentralized process, promises to bring speed, accuracy and efficiency to the investment process.

Since blockchain runs on smart contracts, an investment can be fulfilled immediately, rather than waiting a few days, after the blockchain deems that investment valid. The peer-to-peer investment process — in this case an individual investing directly with a company instead of through a broker — speeds up the process and eliminates unnecessary steps. Blockchain’s tightened security encryption protocols severely minimize the risk of a financial data breach.  

Blockchain has also introduced another breakthrough investment idea in the form of Initial Coin Offerings. Instead of the traditional method of raising capital in an Initial Public Offering on the stock market, ICOs offer digital tokens that represent ownership stakes in a company.

More companies are turning to blockchain-based ICOs because they offer a faster, safer and more accurate way of collecting capital. ICOs have already helped raise $3.2 billion through July of 2022

These organizations are evolving the investment process into a lean, mean blockchain machine.

 

Founded: 1992

Location: Chicago, Illinois

Trading firm DRW aims to bring innovation to markets and exchanges worldwide. Cumberland is a DRW subsidiary focused on the cryptoasset space. In addition to providing expertise in spot cryptocurrency liquidity, listed options and futures, bilateral crypto options and non-deliverable forwards, Cumberland also invests in select web3 and blockchain ventures.

 

Founded: 2013

Location: San Francisco, California

Even though fintech company Cash App maintains its banking and peer-to-peer payment features, it has embraced blockchain technology. The company says it aims to enable users to buy and sell blockchain by reducing barriers to entry for cryptocurrency exchanges. Cash App also produces cryptocurrency educational content to demonstrate its commitment to what it sees as the transformative potential of blockchain for the entire finance industry.

 

Founded: 2013

Location: Menlo Park, California

Robinhood is one of the largest online trading platforms allowing investors to buy, sell and trade cryptocurrencies. Originally intended as a platform for individuals to boost their personal stock portfolios via traditional stocks, Robinhood now allows investments in blockchain-based currencies like Bitcoin and Zcash.

 

Founded: 2019 

Location: New York, New York

With the goal of making investing more accessible to the general public, Public.com has developed a mobile app where customers can invest in diverse funds and manage their portfolios. An intuitive design and social feed make it easy for individuals to navigate the app while learning why people make certain investment decisions. Investors can also take their pick of popular cryptocurrencies, including Dogecoin, Ether, Bitcoin and Algorand.

 

Founded: 2013 

Location: Stamford, Connecticut 

Grayscale Investments serves individuals and institutions with a range of investment options, including opportunities to reap the economic rewards of blockchains. Among its collection of single assets, the firm allows clients to invest in funds covering Bitcoin, Decentraland and Ethereum. As a result, investors can branch out from traditional funding routes to explore the latest developments in the digital economy.

Related ReadingBuy Your Dream Home With a Blockchain Mortgage: 7 Companies Using DLT for Lending and Credit

 

Blockchain Loyalty and Rewards Programs

Maintaining and growing a customer base can make or break many companies. It’s no coincidence that well-performing stocks — like Apple, Disney and Amazon — have expansive customer loyalty programs and millions of diehard fans. Businesses looking to increase revenue and retain customers have found another solution: blockchain-based loyalty rewards.

For most companies, current loyalty programs are hard to keep data on, are outdated and are at severe risk of data breaches. In a 2018 study, IBM found that 73 percent of respondents believe businesses value profits over data security and that 75 percent won’t even buy a company’s products if they don’t trust the company to protect their personal information. Customer loyalty programs have become a target of cyber attackers, but blockchain is a potential solution for making the programs safer, larger and more precise.

The finance industry, like any business, wants a piece of the massive data and profits customer loyalty rewards programs can bring. Blockchain can optimize the process further by reducing costs, enabling a seamless, real-time program and safeguarding important data. The implementation of smart contracts allows customers to collect rewards in real-time and for businesses to manage their data better.

Centralizing a customer’s loyalty programs in one blockchain-based wallet encourages consumers to use their rewards more frequently. Additionally, customers will build a trust and affinity for companies using a high-level security blockchain to secure their personal information.

Here are examples of companies helping to implement blockchain-based rewards programs.

 

Founded: 1850 

Location: New York, New York

Although it remains an established presence in the world of fintech, American Express is still experimenting with newer financial fields such as blockchain-powered rewards programs. The company has joined forces with crypto platform Abra to offer the Abra crypto card, which allows customers to accumulate cryptocurrency rewards when they make purchases from brands within the American Express network.

 

Founded: 2014

Location: San Francisco, California

Loyyal helps businesses expand their customer loyalty programs with a Blockchain-as-a-Service platform. So far, the company has implemented blockchain rewards programs in the travel, employee incentives and credit card industries. Since its development, Loyyal’s blockchain programs have yielded 31 percent annual growth in customer program enrollment.

 

Founded: 2009 

Location: New York, New York 

Expanding one’s crypto portfolio becomes effortless with Venmo’s credit card, which supplies customers with crypto rewards. Purchases in transportation, grocery, entertainment and other categories can all earn spenders the right to convert cash into crypto. After activating the crypto auto purchase feature, customers can immediately invest their rewards in currencies such as Bitcoin, Litecoin and Ethereum.

 

Digital Identity on Blockchain

One of the most serious responsibilities of financial institutions is maintaining the integrity of a customer’s digital identity, comprising some of our most sensitive information. We trust banks with safeguarding our passport information, biometric scans, social security number, accounts and addresses with the expectations that these institutions will keep them private.

Unfortunately, over 2.8 million consumers in 2021 reported fraud cases, including cases of stolen credit and bank information, that amounted to more than $5.8 billion in losses. Blockchain has the ability to stop hackers in their tracks.

The most significant endorsement of blockchain’s security prowess came at the 2018 World Economic Forum in Davos, Switzerland. The Forum concluded blockchain increases trust, accountability and efficiency in data security. Notably, the conference indicated that the financial industry can usher in a new age of digital identity security by leveraging blockchain’s decentralized mechanisms against increased risk and cyber attacks.

Here are a few companies helping the financial sector maintain the integrity of millions of digital identities.

 

Founded: 1911

Location: Armonk, New York

IBM has become one of the world’s leading corporations investing in blockchain, especially in the area of digital identity management. The computer giant helps install personalized blockchain-based “Trusted Identity” management solutions that use decentralized ID authentication and an updated due diligence platform. This way, individuals can stay connected while monitoring who can view their personal information.

 

Founded: 2014 

Location: Sparks, Nevada

Blockchains provides digital identity management software tools for its customers. Users can leverage the company’s system to create digital representations of themselves with distributed information like digital documents and devices. Key management technology provides an additional layer of security, enabling customers to control access to their data, recover lost e-wallets and perform other blockchain-related tasks.

 

Founded: 2015 

Location: San Francisco, California

Civic’s secure identity platform uses multi-factor authentication on mobile apps and the web without the need for passwords. The blockchain technology privately saves encrypted customer biometric information like thumbprints, so logins to bank accounts or websites are smooth and virtually incorruptible. A unique feature of Civic’s product is that any customer can revoke their name from the blockchain at any time, permanently deleting the information and making it useless to would-be criminals.

 

Other Blockchain Applications

Founded: 2009

Location: Oakland, California

Block aims to facilitate economic empowerment for consumers and businesses around the world through its family of fintech brands. The company designed a bitcoin mining chip and is now expanding the project to include development of a bitcoin mining system, which would involve miners using software and hardware to verify transactions on the cryptocurrency blockchain.

This content is for informational and educational purposes only. Built In strives to maintain accuracy in all its editorial coverage, but it is not intended to be a substitute for financial or legal advice. Rose Velazquez contributed reporting to this story.

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