Service Innovation on Blockchain Technology

This article discusses the blockchain technology and its impact on service innovation in the financial sector. It covers the basics of blockchain, public vs private blockchains, and various applications of blockchain in financial services.

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Service Innovation on Blockchain Technology
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Blockchain Technology
The blockchain is a distributed collection of data stored in computers that keeps
records and manages business deals. Instead of one single institution such as a bank, blockchain
uses a network that has computer codes to endorse business deals and keep the records (Agarwal
& Selen, 2011a). Since the approval of these business deals is distributed in nature, it is almost
imposible to interfere with the system and also the Cryptography helps to keep these deals safe.
The Blockchain Revolution in Financial Services
Blockchain Technology aims to improve the way things are done, transparency and
the security of the financial sector, make it more cost-effective and also coming up with more
improved innovation (Agarwal & Selen, 2011b). A lot of big financial institutions like major
banks in the world have already started exploring the potential of this technology. It is a
reorganized public ledger that has all the details of every business deal that Bitcoin has ever
completed.
Due to the improved innovation in the protocols of the technology, the ledger is now
more precise and safe. The technology became more popular when it became known that
blockchain can be used to keep the information about the digital assets transfer, can keep records
of property ownership, and drawing smart contracts that demonstrate the rights naming a few
applications (Agarwal & Selen, 2014). Due to the technology reorganizing and making some of
these processes automatic, operations in organizations are now done faster and cheaper.
ABCs of Blockchain
It was first established by Bitcoin the cryptocurrency. It is a distributed ledger
managed by a network of uninvolved people or participants. These participants also called

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Bitcoin “miners” use computers with sophisticated algorithms and security protocols to handle
business deals, therefore, ensuring they are highly accurate and secure. The blockchain is
available to everyone, and it is also completely transparent, but the miners who process these
business deals first are the only ones who get compensated. As other miners process and confirm
different transactions, these transactions are grouped into groups known as blocks, these blocks
of sales combined make the blockchain. Blockchain technology transforms the transaction
process by diffusing the authority, being transparent and eliminating the need for intermediaries
that were previously necessary for the transaction process to be successful (Petrasic, &
Bornfreund, 2016).
Public VS Private Blockchains
Public blockchains are available to all. Transactions are confirmed publicly and kept
in the public domain. The methods of agreement and financial incentives are incorporated into
the system to make sure the system is of high integrity and to legitimize the business deals. One
of the advantages of public blockchains is funding, which is outside the government or any
private entity’s influence. Developments of the public blockchain are made by the agreement of
all the participants since it is available to everyone (Hacklin, Adamson, Marxt & Norell, 2015).
This easy access leads to greater participation and also the likelihood of the public blockchain
system to be used in many different applications is higher. Finally, they offer the possibility of
lowering the transaction fees.
Private Blockchains are formed and managed by a private entity. Only the authorized
parties access the security protocols. Transactions are confirmed privately, and it is possible to
change them, therefore enabling the operators to adjust mistakes. This component is not allowed

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in public blockchains since it can cause insecurity. The private blockchains are divided into two;
they include the consortiums which consists of participants that are selected from some
organizations and the second type is the fully privatized blockchains whose participants are only
confined from one organization. Transactions are approved faster, in seconds. This is because
they take place on networks that are more collected with fewer computers.
Blockchain Applications in Financial Services
Trade execution and settlement
Blockchain makes it possible for settlements to be faster and lower the costs and also
making it harder for fraudsters. Other companies will make unique offers for trade and
settlement. One example is the Nasdaq’s private Linq blockchain network, which helps the
private companies keep the records of the changes in the ownership of shares given to
shareholders, people who invested first and also employees (Pitelis, 2009). Also, the ripple has
developed a platform for value exchange which the financial institutions can interchange services
without depending on intermediaries. In these occasions, information about who owns the
properties or who ownership has shifted to is added to the blockchain and disbursement and the
agreement of the trade both take place together (Pitelis, 2009).
Asset exchange
Blockchain makes it possible for the advancement of new deals that assists the trade
of different kinds of assets, not financial gears alone. This would involve the transfer of primary
representation that represents vital assets which can be physical property or intellectual.
Physical asset registration

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Blockchain will make the process of listing assets very secure which will also include
the real property. It is unnecessary with blockchain in real estate to be required to have title
insurance to establish the accuracy of a local government’s property registry. Instead of the
expensive title review that takes a long time, creating an open ledger of property ownership in a
public blockchain helps to reduce the turnaround time to transfer ownership from one person to
another and also reducing the costs (Magnusson, 2013). It will also help buyers compare prices
faster and following up payments on contracts.
Supply chain management
Blockchain carefully follows the movement of goods hence it makes it difficult for
fraud to take place thus a safe supply chain management.
Cash reserve management
Using multiple intermediaries like it is done now increases the settlement time.
Therefore the costs and risks are higher. Blockchain reduces the settlement time which will then
reduce the amount of money needed by the financial institutions to take care of the settlement
risks (Den Hertog, 2010). This will be especially important for international transactions which
will take longer to complete but by using blockchain technology can only use hours.
Conclusion
The blockchain is in the forefront in providing tech-based innovation that is causing a
stir in the banking and financial sectors. It will take some time for these institutions to
understand the advantages and disadvantages of this technology fully. They cannot just sit and
wait while their competitors use it. It is essential for institutions to embrace and participate in

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this innovation to help them understand how technology is affecting the sector and also to be
ready for opportunities as the industry evolves.

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References
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Agarwal, R., Selen, W., (2011b). An integrated view of service innovation in service networks.
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Agarwal R, Selen W (2014) The incremental effects of dynamic capability building on service
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Den Hertog, P., (2010). Knowledge-intensive business services as co-producers of innovation.
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Hacklin, F., Adamson, N., Marxt, C., Norell, M., (2015). Design for convergence: managing
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Magnusson, P., R., (2013). Benefits of involving users in service innovation. Eur J Innov Manag
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Petrasic, K. & Bornfreund, M. (2016) The Blockchain Revolution in Financial Services. Pearson
Pitelis, C. N., (2009). The co-evolution of organizational value capture, value creation, and
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