We have already discussed last weeks the operation and the nature of the Blockchain which underlines two of its advantages: on the one hand traceability and on the other hand safety.
In this article, we will study the impact of the Blockchain on the business model’s companies. More specifically, we will see how this technology improves and facilitates transactions within the financial ecosystem.
Currently, most systems based on trust between several parties involve the presence of a trusted third party*, a person who ensures that several conditions are met to complete a transaction and who will execute it in accordance with the contracts signed and the legislation.
Moreover, the Blockchain competes with the traditional trusted third party system. Indeed, this new market instrument makes it possible to allow intermediaries, in this sense the traceability and security offered by the Blockchain allows intermediaries to free themselves from tedious tasks such as verifying siloed informations (e.g. a certificate of the mortgage register during a real estate sale or the updating of a securities movement register). The profession of these intermediaries is therefore evolving towards a profession of advising and guaranteeing information.
More precisely, this new type of intermediation which makes it possible to streamline the business model of companies is linked to the emergence of smart contracts*. We can show that this is not strictly speaking a contract, as its name indicates. In fact, a smart contract* is an automated computer process that acts as an intermediary between the user of the Blockchain and the Blockchain itself. Once started, It is a stand-alone program which automatically executes conditions written upstream in the Blockchain, without requiring human intervention. It works like any conditional instruction of type “if — then” (if such condition is verified, then such consequence is executed).
Practical example: Nowadays, when you invest in a real estate asset, there are many barriers: high costs for notaries and lawyers, a slow and complex administrative procedure to understand and then a risk due to human intervention.
Smart contracts can automate this procedure and solve these constraints. Indeed, they allow actors to invest much more quickly and simply; the usual fees paid to third parties are eliminated and the risk of human intervention becomes non-existent. For example, you can invest by going directly to our Equisafe.io internet platform launching mid spring!
In addition, smart contracts can be used to record the certification of KYC* (Know Your Customer) and AML* (Anti Money Laundering) data by a third party. Once this data has been authenticated by the third party, the smart contract will be able to record the value transfer desired by users on the Blockchain.
For example, it is possible to set a maximum amount in euros not to be exceeded thanks to a smart contract on a transaction to insert in the Blockchain.
-The KYC process allows the collection of a user’s personal data (passport, identity card or investor’s address) on an internet platform where a third party organisation will verify the authenticity of this data. If the third party certifies that the user’s personal data is valid, this data may be recorded on the Blockchain thanks to smart contracts that will link this Internet platform to the Blockchain;
-The AML process makes it possible to quickly identify suspicious transactions, particularly money laundering transactions, where a user would like to record the information of this suspicious transaction on the Internet platform and then insert it into the Blockchain. A third party organization will act as an anti-fraud barrier: If the information is not considered valid, the smart contract will not record the information of this transaction from the Internet platform to the Blockchain. If the information is considered valid by the third party organization, the smart contract will record the information from this transaction that is finally deemed lawful on the Blockchain.
Overall, the transformation of Business Models resulting from smart contracts gives to the Blockchain users an opportunity to save time and standardize identity control (KYC) and banking (AML) procedures, which are currently very disparate at the level of the control bodies of each company that usually uses them.
Equisafe uses this KYC process to save you valuable time: investing in an asset no longer requires you to go through many intermediaries and the investment procedure is now standardized for all your transactions. All you have to do now is to go to the Equisafe.io platform!
Trusted third party: any entity capable of certifying “transactions”: lawyers, banks, notaries… etc.
Smart contract: autonomous program that, once started, automatically executes conditions registered upstream in the Blockchain, without requiring human intervention.
KYC: a process that collects a person’s personal data, which is then verified by third-party organizations.
AML: a process that allows for the rapid identification of money laundering suspicious transactions involving third parties.