By Ankit Srivastava
Technology has been changing the landscape of all business sectors. The Banking system is also adapting the modern technology to keep up with the market movements. There used to be times where most financial transactions required customers to make a trip to the Bank. Payments used to be made either in cash, checks or through money orders. But these are all events of the past. Technology has revolutionized the way the financial system operates. The latest upgrades in the field of finance and technology are referred to as ‘Fintech’. Fintech has made it possible to make payments and perform fund transfers online.
The Blockchain Network
The Blockchain is an upcoming technology. It is a simplified way of recording and storing online transactions. This technology forms the basis for the notorious cryptocurrencies. Ironically for many, this technology is synonymous with cryptocurrencies. But this is not the case. Blockchain uses a cryptographic code for securing information. All the data is saved on individual blocks. With every new transaction, a new block is added to the network. Every block is recorded with a timestamp which makes the transactions transparent. These blocks can be accessed from any node or terminal connected the network. Any changes or modifications in the blockchain can be easily traced or tracked. The simplicity of this technology offers a very heightened level of security.
The cryptocurrency space is reliant on this technology. However, the cryptocurrencies are largely unregulated by the governments. This makes cryptocurrencies a risky endeavor. But this does not undermine the capabilities of the Blockchain. Currently, many banks and financial technologies are trying to onboard systems powered by this tech. Using a network built on this technology has many advantages.
World Bank Initiative with Blockchain
World Bank taken the first initiative to use Blockchain technology is a huge way. The World Bank has recently launched an initiative to issue Bonds with this Technology. Basically, a Bond is a fixed income interest-bearing financial security. A bond is a debt instrument which is repayable after a specific duration. World Bank is issuing a Bond with the purpose of funding sustainable development initiatives. This Bond is being launched in association with the Commonwealth Bank of Australia. Some market experts have termed this launch as the first ever Bond-i issue. Bond-i is the abbreviation for Blockchain Offered New Debt Instrument. Incidentally, the name bond-i is a reference to the iconic Bondi beach in Australia.
The World Bank has announced that the Commonwealth Bank of Australia will be the sole institution in charge of this bond issue. The World Bank has not yet announced the technical details about the launch. It is estimated that the Bond issue is projected to raise a sizable capital in Australian Dollars. The exact amount is not yet ascertained, but as per experts, the bond issue is expected to raise somewhere between $50 Million to $100 Million in the Australian currency. The bond will be issued for a term period of two years. Discussions and consultation are still being carried out with investors to finalize the specifics of this project. The Investor interest in the blockchain bond is highly encapsulating.
Microsoft Corporation and the Bond-i
Since the whole issue will be heavily reliant on the technological framework, World Bank and the Commonwealth Bank of Australia have also roped in Microsoft Corporation for the Blockchain Bond Issue. The primary role of Microsoft in the public offering is to handle the technological framework of the bond issue.
Microsoft Corporation has their own revolutionary software platform called Ethereum. Ethereum is a blockchain network that is distributed publicly. The Ethereum blockchain is unlike other cryptocurrency networks. It focuses more on executing the programming codes of any decentralized application.
As per the reviews of many tech experts, this bond issue will be carried out on the Microsoft Azure Cloud Computing Platform. Microsoft Corporation will be designing a private ethereum based blockchain network for this initial public offering. This will add to the solid platform and a process that is free of any bugs. Microsoft is also taking every precaution for making this blockchain network invulnerable to cyber attacks.
Experts Opinion on Merging Blockchain and the New Bond Offering
Market experts from the field of both Technology, as well as Finance, are exalted. The Blockchain technology is known to make the transactions public and transparent. Using this network will also have a significant impact on reducing the transaction costs associated with the initial debt issue. The movement of funds will also happen instantaneously on a real-time basis. The channels for subscribing to these bonds will still be done in the old fashioned way. Investors have to register themselves and use the existing channels for making the payments to the network. Once the payment is recorded through the private blockchain, it will again be routed to traditional modes of finance.
Experts are convinced that using this fresh technology is definitely an improvement over the way things are done currently. Blockchain has all the capabilities to simplify the process for the different market participants. With this technology, it will become very easy to raise capital. Additionally, it can also simplify the trading platform in the future. Additional benefits of using this platform include improved operational efficiency. Even the regulators will find it easy to maintain a regulatory oversight simply by accessing the network.
Previous Revolutionary Steps by World Bank
The initiative taken by the World Bank to club an upcoming technology in a financial event is astounding. But, this is not the first time that the World Bank has taken such a revolutionary step. Prior to the Bond-i, the World Bank has also launched an Electronic Bond. This was back in the year 2000, at the dawn of the new millennium. The E-Bond was the first of its kind. It was a totally integrated bond which was offered through online electronic mediums. This was in January 2000. The World Bank was able to raise USD 3 million by the issue of 5-year debt instruments. The World Bank was also the pioneer in issuing the first Globally Settled bond in 1989.
By Ankit Srivastava
The author has good experience in the field of IT and latest technologies, mobile and web Application Development and spend his time on researching new technologies in trends like Blockchain Application Development, IoT app development.