BBF2134 Financial Markets and Institutions

Trimester 1, 2018/2019

MINI PROJECT
Blockchain Management:
Risk and Efficiency of Blockchain
Submission date: 03-09-2018

Tutor: Miss Peong Kwee Kim

Tutorial Group: BM02

Prepared by:
Student ID Student Name Phone number
1132700749 Abdullah Hakim Bin Abd Hamid 019-7777472
1161303484 Hollyfeld Scales Peter 017-8907128
1161304126 Natasha Farah Ain Binti Mohd Hairumsha 011-10342435

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Contents
Abstract ...................................................................................................................................... 1

Objective .................................................................................................................................... 1

Introduction ................................................................................................................................ 1

What Is Blockchain And How Its Work ................................................................................ 2

Blockchain and its implications to banks ............................................................................... 4

Advantages and disadvantages of blockchain ........................................................................ 5

The Management Of Blockchain : ............................................................................................. 8

Potential Risk Inherent in Blockchain .................................................................................... 9

Managing The Threats and Risks ......................................................................................... 13

Blockchain Security ............................................................................................................. 14

Previous Research .................................................................................................................... 16

Suggestion ................................................................................................................................ 17

Conclusion ............................................................................................................................... 17

References ................................................................................................................................ 18
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Abstract
Blockchain technologies offer new open source-based opportunities for developing new types
of digital platforms and services. While research on this topic is focused on how efficient
blockchain in the banking system and how secure the system. Efficiency how effective the
operation in the organization. While the security is in an information technology (IT), is the
defence of digital information and IT assets against internal and external, malicious and
accidental threats. This defence includes detection, prevention and response to threats using
security policies, software tools and IT services. To broaden our understanding of blockchain
efficiency and the security of blockchain, we build on earlier literature where we will discuss
more about what is blockchain, what blockchain can do, how the blockchain works, what the
blockchain implication to banks, the advantage and disadvantage of blockchain and the way of
managing the blockchain.

Objective
 Understand what blockchain is and how the system works.
 Identify what is the risk of the blockchain.
 Understand the advantage and disadvantage on blockchain.
 Identify the security that offer on the blockchain.

Introduction
A blockchain is a singly LinkedList of block, with each block containing several transactions.
It provides unchangeable and unchanged data stores that can be used across user networks,
create assets and act as shared black books that record all transactions. Every transaction can
be easily asked, giving transparency and trust to all parties involved. With an original creator,
or an inventor, anonymously, the real motivation behind the barrier cannot be known.
However, it has proven to be a more than adequate solution to the many issues. In the
blockchain there will have a data that multiple clients whether it an individual or an
organisation have a copy of, which in turn needs consolidating and validating.
Blockchain technology is considered one of the most important technical innovations in
digitizing asset ownership. Blockchain has been demonstrated as a programmable platform for
managing contracts and ownership and provides audit trails that cannot easily be interrupted
but can be distributed in real time. The block network is the data structure that makes it possible
to create digital led transactions and divide them between distributed computer networks. It
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uses cryptography to allow every participant in the network to manipulate the ledger safely
without requiring the central authority.
Once a block of data is recorded on a blockchain block, it is very difficult to change or remove.
When someone wants to add it, the participants in the network are called miners who all have
copies of existing blocks running the algorithm to evaluate and confirm the proposed
transaction. Blockchain technology emerged to enable companies to create and validate
financial transactions on the network immediately without central authority. Traditionally,
banking transactions and payments rely on central authorities or intermediaries to make or
activate payments. Blockchain's architecture allows the networked computer to reach
agreement without requiring this middle man. In banking there are many use and built-in cases
to implement blockchain.

What Is Blockchain And How Its Work

A blockchain is the structure of data that represents a financial ledger entry, or a record of a
transaction. Each transaction is digitally signed to ensure its authenticity and that no one
tampers with it, so the ledger itself and the existing transactions within it are assumed to be of
high integrity. The lure of blockchain was its method of verifying and tracking transactions.
Instead of a trusted third-party or a central bank, it relies on consensus among a peer-to-peer
network of computers based on complex algorithms. Rather than being stored in a single
database, blocks of time-stamped transactions are stored on all systems across a value chain.
This elimination of middlemen and decentralization of trust has introduced possibilities to
make processes such as cross-border payments, trading and settlement faster, more reliable and
less costly.
This is an explanation how blockchain works is when a new transaction or an edit to an existing
transaction comes in to a blockchain, generally most of the nodes within a blockchain
implementation must execute algorithms to evaluate and verify the history of the individual
blockchain block that is proposed. If most of the nodes come to a consensus that the history
and signature is valid, the new block of transactions is accepted into the ledger and a new block
is added to the chain of transactions. If a majority does not concede to the addition or
modification of the ledger entry, it is denied and not added to the chain. This distributed
consensus model is what allows blockchain to run as a distributed ledger without the need for
some central, unifying authority saying what transactions are valid and perhaps more
importantly which ones are not.
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Blockchain’s foundational element: -

 Decentralization: Rather than one central authority controlling everything within an
ecosystem, blockchain distributes control among all peers in the transaction chain,
creating a shared infrastructure.
 Mining: A distributed consensus system rewards miners for confirmation and
verification of transactions and stores them in blocks using strict cryptographic rules.
 Data integrity: The use of complex algorithms and consensus among users ensures that
transaction data, once agreed upon, cannot be tampered with. Data stored on blockchain
thus acts as a single version of truth for all parties involved, reducing the risk of fraud.

Blockchain technology was designed to solve four problems: -

 Double spending
A double spending is an attack where the given set of coins is spent in more than one
transaction. There are a couple main ways to perform a double spend. Here how
blockchain handle the double spending by suppose there are two transaction spend the
same input to the same block. Bitcoin going automatically rejects both transactions to
prevent one bitcoin from going toward two separate ends. A similar rejection occurs if
two separate blocks receive inputs from the same bitcoin sources.
 The issue of trust
Blockchain could revolutionize the way we protect consumers. It isn’t just safe. It has
the potential to drastically improve security and transparency. With all transactions
recorded transparently on a distributed ledger, trust levels throughout the capital
markets would increase.
 Consensus on the latest correct version of the transaction history
Consensus mechanism would allow participants to communicate with one another.
Using this method, transactions could be approved automatically in seconds or minutes,
significantly cutting costs and boosting efficiency.
 Preventing anyone from making a change to an agreed chain of transaction
In the old way of doing things, numerous contracts might be involved to manufacture
one video game console. And each side may have its own paper copies. Smart contracts
provide automated accountability. Because this is blockchain, everyone involved looks
at the same contract; no one can change it without the permission of most others.
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Blockchain and its implications to banks

International payments and money transfer

Since blockchain is a new system for financial transaction, many still do not understand how it
works. Whether the public realizes it or not, blockchain has major implications on current
traditional banking system either directly or indirectly. One of the most talked about topics
about the implication to banks is how both of blockchain and traditional banks conduct their
international payment or money transfer. Since blockchain offers a faster way to transfer
money overseas, this would disrupt the traditional way of money transfer or also known as wire
transfer. The way that is conducted by traditional banks is by charging extra fees on the transfer
and it would take a longer time to reach the recipient usually a week. Whereby, blockchain
offers their customers a higher-security at a much lower cost than traditional banks through
peer-to-peer (P2P) payment system. The recipient in blockchain can receive the money, or in
this case cryptocurrencies in just of hours within the time of payment. Consequently, this
system gives the public an access to a fast, cheap and borderless transaction without physical
interaction with another human being thus, making it a more efficient, time-saving way of
transferring money. However, these efficiency of blockchain will reduce the gains on foreign
exchange transactions and transaction fees, thus decreasing the revenue of traditional banks.
The fees on foreign exchange and transactions make up as high as 50 percent of the total
revenue for some of the commercial banks in the world.

Implication on financial service employment

Just like the effect of automation on manufacturing, blockchain also will affect the workers in
financial services field and its landscape. Despite all positive potential of blockchain in this
industry, there are still majority of people that fear its effect on the industry may have more
negative than positive. The adoption of this technology will impact some of the major
industries such as payments, banking, insurance and any other industries in financial services.
In the long run, this adoption is going to spread everywhere despite the scale of the operation
which will change the way of doing things, leading to lesser jobs. Just as the emerged of E-
hailing service in the recent years, it leads to the decline use of taxis. Further adoption of
blockchain means certain roles within the industry will disappear. Whereby, the opposite side
of it is it will create a whole new jobs for people.
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Advantages and disadvantages of blockchain

Advantages
When it comes to technological advancement like blockchain system, the users involved in this
process will not only experience the good side of it but also there will be drawbacks that needs
constant improvement. Firstly, the traditional banking have a lot of operating cost that must be
maintained in order to operate efficiently. These costs include utility bills, employees’ salary,
maintenance of automatic teller machine (ATM), and many others. Besides the cost involves
in operating, there is a limitless production of waste during their operation such as papers and
printer toner. According to Luisanna Cocco (June 2017), the existence of blockchain shredded
all those cost involved. This is because the users only need to connect to the network and they
can do transactions after the system is connected. Therefore, the utility bills such as electricity
and water which is incurred in the bank and maintenance ATM does applicable by using
blockchain. Besides that, the employees at the bank counter who mainly deal with the
customers as a middlemen to conduct transaction will also be eliminated since blockchain does
not require the interference of these employees to conduct transaction. Moreover, this cost
saving features is also applicable to the consumers. According to Soonduck Yoo (2017), by
enabling direct transaction between individuals to another individuals, they can bypass high
commission fee that is incurred by using financial intermediaries. Mark Buitenhek (April 2017)
also said that the adoption of blockchain removes the need for a central clearing mechanism
making it faster, cheaper and more transparent way of sending currency than sending traditional
currencies. With that being said, blockchain will benefit all the users in term of time and cost
saving which is very beneficial in the long run.
Blockchain can also be used in a more efficient way of tracking, transferring, protecting and
controlling of intangible and tangible asset, Jenitha Thavanathan (2017). Intangible assets such
as votes, ideas, reputation, intention, information, stock shares, reservations, or copyrights
(books, music, illustrations, digital fine art etc.) can be easily tracked and in a more secure
manner. For example, personal data such as health care information, voting rights and many
others can be kept privately and only be accessed and transferred by its owner through Identity
authentication and secure access which is also real time. Another example that can be looked
at is in education, it can be made into a trackable resource, recorded in the ledger account to
be used by employer to track down employees with the right qualification. In term of tangible
asset such as property or any other goods, the adoption of blockchain is very useful to track
these assets or goods. Any asset can be registered as a digital asset on the blockchain, its owner-
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ship can be controlled by whomever has the private key. The asset can then be sold by the
owner by transferring the private key to the buyer. For example, the contact to buy properties
such as the title and deeds can be recorded and traced by the owners therefore eliminating the
risk of losing these documents. Besides that, Food and Beverage Company that would like
minimise the risk of contamination in their product can do so by using blockchain to track the
source of the supplied goods. Futhermore, the implementation of blockchain also can minimise
the risk of the movement black market or illegal goods. According to Jenitha Thavanathan
(2017), Blockchain technology can be utilized to form a registry that would allow users to trace
the ownership of an item to determine whether they are of illegal or false provenance.

Disadvantages
Despite all the advantages that can be seen in the technological aspect of blockchain, there are
still numerous of weaknesses or disadvantages of using blockchain in conducting transaction.
First among the list is related to the energy consumption and cost of the technology for
adoption. According to Fabrizio Lamberti (2018), in order to operate blockchain on a larger
scale, blockchain requires massive amount of hardware and storage in order to be operated
efficiently. Besides that, for a single storage of customer’s ledger of transaction, it would cost
a lot per transaction that is done. Furthermore, the energy that is consumed by each of the
hardware would cost the host a fortune which in the long run will turn it into a massive pile of
maintenance cost if more and more blockchain server is hosted.
Secondly, Fabrizio Lamberti (2018) also said that the information that is encoded in blockchain
system is accessible by everyone. This is a huge drawbacks that is faced by consumers as it
would disrupt the privacy of consumers. Further example is when a transaction is done, it could
be analysed by a tech-savvy person. This is because blockchain is distributed which means that
everyone has access to the transaction, it could be traced back to each. It could lead to the leak
of private information and thus leading to misappropriate use of personal information.
Thirdly, since the transaction in blockchain is recorded and done by a self-executing coding
system, it is easily can be manipulated by a hacker that can exploit the bug. Furthermore, the
recorded transaction cannot be changed hackers can exploit code flaws to send the contents of
the transaction to their own accounts. For example, a hacker can exploit the content of the
transaction and copy the transaction to any other accounts that they like including their own
and since all the transaction occurred mostly cannot be undo, it would lead to financial losses
to the victim.
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Lastly, since blockchain technology is a technology that is not fully developed and tested to
the large scale, it is subjected to a huge volatility of the price of the currency. It is solely
depends on the demand and supply of bitcoin. The price of the currency can increase
dramatically as we can see happening recently, the price of bitcoin was few hundred dollars in
2017, and it jumped up thousands fold to twenty thousand dollars per bitcoin. Since bitcoin is
not approved as the formal currency of many countries, the price fluctuate can be from the
speculation factor alone. Furthermore, when there is financial loss happened in this system,
there will be no compensation from the legal entity which will exposed the consumers to a
greater risk of financial loss.
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The Management Of Blockchain :

Blockchain is a new era system that will give a lot of benefits especially for business
management where people can exchange their value and assets, enforcing contracts and sharing
data via this system. There are two types of blockchain which is the permissionless and
permissioned. Permissionless is to allows any party (without any vetting) to participate in the
network and permissioned is formed by consortiums, which evaluate the participants. The
existence of this system is in accordance with nowadays very advance technologies that might
help to improve the efficiency in the business management and reduce the risk of fraud,
eliminate waste and creates new revenue stream for business. However, there is a certain of
risk for the users to consider by using blockchain system especially in technology network
system risks. As noticed, every technologies network system will lead to cyberattacks or the
system being hacked in anytime by someone who very expert in technology. Blockchain is a
distributed digital ledger of transactions that can record not just financial transactions but
virtually everything of value that requires non-repudiable ownership proof. For example,
blockchain’s ability to store information such as identity, ownership and membership can be
accessed based on predefined terms. This is mean that the privacy of the users of blockchain
or who are involve in the system will have the risks that their privacy may be accessed by
someone.
In order to make the blockchain secured, the user have to take an alternatives to manage
blockchain system by managing the risk and innovates something new to improve the
blockchain securities.
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Potential Risk Inherent in Blockchain

Risk may be defined as ‘possibility of loss’, which may be financial loss or loss to the image
or reputation in the business management. Blockchain like any other system that may change
people thinking that are intend to taking risks in order to improve their efficiency in business
management. The higher the risk taken by user the higher the improvement or loss result in
their business performances. This is the potential risk may inherent in the business management
via blockchain;

 Data confidential risk

 Regulatory & compliance risk

 Criminal risk

 IT security risks

 Key management risk

 Open source risks

 Liquidity risk

 Impact on fiat currency

 Non-adoption risk

i. Data confidentiality: This is refer to the unsafe information that are placed in one place
in a system where someone can break through the system to steal the important data.
Blockchain is a system that record all the activities in the business and keeping the record
as a resources for the company such financial transaction proof. The consensus protocol
requires that all participants in the framework can view transactions appended to the
ledger. According to Chang Lin and Chun Liau (2017) consensus function is a mechanism
that make all the blockchain nodes have agreement in same message, can make sure the
latest block have been added to the chain correctly, guarantee the message that stored by
node was the same one and wont happened “fork attack”, even can protect from malicious
attacks. While the transactions in a permissioned network could be stored in a hashed
format so as to not reveal the contents, certain metadata will always be available to network
participants. Monitoring the metadata can reveal information on the type of activity and
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the volume associated with the activity of any public address on the blockchain framework
to any participant node.

ii. Regulatory & compliance risk: Regulatory and compliance is an organization’s

adherence to laws where companies are challenged to comply with laws and regulations.
As we learn about blockchain, some country or nation have banned the uses of the
blockchain system because of some reason that the company have considered. There is a
regulatory risk that may be inherent in blockchain applications which is the type of
participants in the network, and whether the framework allows domestic or cross-border
transactions. This could also include financial institutions need to ensure that regulatory
requirements are addressed in the blockchain based business models, especially in their
inter-operability with legacy infrastructure.

iii. Criminal risk: Blockchain also lead to a criminal risks where via blockchain, people can
transacted ammunitions and drugs are using Bitcoins. This is mean that, the blockchain is
the perfect hiding places for crimes activities. As there is no central clearinghouse, money
laundering could more easily go under the radar and financial of terrorism could be more
easily funded. Besides it, the blockchain system also is vulnerable from cyberattack where
the virus attack also is one of the criminal risk faced by the company which is something
like hacking the blockchain system for example like Wannacry Ransomware worldwide
attack.

iv. IT security risks: As mentioned before, the information technologies security risk is one
of the major risk faced in the use of blockchain. It is the risk where someone who are
expert in IT can break through to the security system to steal data or damaging the system
of blockchain. According to Santhana and Biswas (2017), the existing policies and
procedures will need to be updated to reflect new business processes. In additional,
technology concerns could include the speed, scalability, and interface with legacy systems
in implementing the technology. Due to technology system, blockhain have high
possibilities cyberattacks where with the smart contract is require an oracle agent to trigger
smart contract execution. The risks of hacker may be involve in the system that make the
data in the blockchain will be unsafe.
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v. Key management risk: The key provided to secure the blockchain such personal key,
server key and nodes is not guarantee the blockchain is a strong system. For example,
private key can be stole by anyone or being hacked to steal the users asset with public
address. Digital assets could become irretrievable in the case of accidental loss or private
key theft, especially given the lack of a single controller or a potential escalation point
within the framework.

vi. Open source risks: Blockchain is a free sources where everyone can access the blockchain
codes and viewable by anyone who has the codes. This risk is it can lead to leaked
information of the company and the risk of tampering using malicious codes.

vii. Liquidity risk: Liquidity is defined the asset changed to cash efficiently. Blockchain that
are also known as Bitcoins has their own market where people can invest on the coins just
like investing assets in buying stock of shares in Bursa of Malaysia for example. This is
mean that the blockchain also may produce a certain of liquidity risk. The Bank for
International Settlements warned that the adoption of Distributed Ledgar Technology
(DLT), such as the blockchain, may introduce new liquidity risks. In current business
models, intermediaries typically take on the counterparty risks and help resolve disputes.
Dispute resolution in a distributed trust environment is a requirement that will rely on
preordained arrangements. For example, there is a complicated system of the payment
because the payment is related to export and import financial system to make a legal
transaction.

viii. Impact on fiat currency: According to Fineextra article, the blockchain lead to the
concept of digital currency or cryptocurrency. The value of a nations' currency is
determined by its trade volumes, natural resources and overall state of its economy and its
people. If cryptocurrency becomes prevalent in a country instead of the country’s fiat
currency, it will affect the economic of the country where the banking services has been
substitute with cryptocurrency and weaken the country currency value and money supply.
Most of country has banned from using blockchain system especially for developing
country such Thailand, Vietnam, India and many others country. The recent
cryptocurrency ban in China could be a pre-emptive move against such an adverse
development.
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ix. Non-adoption risk: This is the risk of business management that are not adopting with
blockchain system after implementing the system in their company. This is also is the kind
of business that may not adopt in technology that are also is a threat for the company in
experiences the risk to their business management. Blockchain is the new system in
purpose to improve business efficiency but some company may not adopted with the
system because it is new system. In blockchain system, it is known as the middleman in
business activity that function like clearing and settlements of an arrangement and
agreement. This is a system that substitute to the traditional middleman or agent to improve
the efficiency of any contract where it can prevent fraud and fast transaction. But for
certain company, it is not suit with the system and it can affect the performance of the
business.
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Managing The Threats and Risks

In business management, the firm or the company will make a planning for future cases
including for risk management. Risk management is the process of identifying, assessing and
controlling threats before or after the threats happened. In order to make sure the business
management is free from the threats, the company have to implemented some ways to prevent
the risks in earlier for using the blockchain system. Below are the ways how to manage the
risks in the uses of blockchain;
i. Monitor the company’s activities by date-to-date

As a user of the blockchain management, they have to make sure that the company have
been monitored well to identify the problem or misconducted from using the blockchain
system. Assessing company activity is one of the way that can prevent risk or threat. For
example, monitoring the technology department to understand what they have done so far for
the company which the system have given a big contribution in efficiency management or not.
This may also improve the company management to become more efficient and have good
security in technology.
ii. Monitoring the system

In the uses of blockchain, the technology departments must have to secure the technology
all the time and in other word to stay plugged in to monitor the activities on the blockchain
system. This is to aware from cyberattack toward the company because the blockchain network
system have high possibilities being attacked by hacker or cyber terrorism.
iii. Apply for Insurances

With the risk threat, the company may looking for an insurance for their company to be
insured when they are failed to overcome the threat. The role of blockchain in insurance
purchase is still uncertain. Because of the blockchain system is still new and not being
introduced to many firm and less information about its threat, the insurance probably not being
offered to the blockchain system. Network security, surety bonds and other traditional
coverages will certainly come into play as the technology develops, but perhaps the most
dramatic and immediate impact will be in the way insurance is purchased and delivered via the
technology. Risk managers will need to be focused as these developments as they quickly and
quietly become integrated into day-to-day business.
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Blockchain Security

i. Token security: Token security is a concept that to bind the client’s identity via smart
key. The token security work as an authorization server to binds a cryptographics key by
the client. It is like the pop-key where the client can be accessed by the resources server
who have the token. The smart contract also involved where it provide its address. This
public key is included in the access token, stored in the blockchain and it is the system of
verifying the key security presented by the client’s token. The key server that verifies the
token will create a challenge-response with the address bound to the token, which verifies
the identity of the client requesting access to the decryption keys. This security is to
empower the defense of the blockchain system from cyberattack that is one of the treat in
this system.

ii. Client Privacy: As we noticed, blockchain is a public ledger that are store all the
transaction in the block and can be accessed by anyone. In other way, the client can
generate new address in each transaction if they want to make their information with client
is privacy and confidential. By doing so, unauthorized user can not accessed the
information in the address and secure from attacker to associate with them.

iii. Denial of service attack security: An event that occurs when an attacker takes action that
prevents legitimate users from accessing targeted computer systems, devices or other
network resources. It is like flood servers where the systems or networks with traffic in
order to overwhelm the victim resources and make it difficult or impossible for legitimate
users to use them. To prevent the denial of services, the company have to deployed an
antivirus and firewall to their technology that may helps in restricting the bandwidth usage
to authenticated users only. Other than that, server configuration also can help to diminish
the probability of being attacked.

iv. Communication security: Company can interact and communicate very efficient via
blockchain where the company is connected to each other and easy to share information
between the company. In order to improve the communication activities, the company
have to take an alternatives to secure their communication and keep their privacy safe from
unauthorized user to spy their activities. The personal key can be the solution to secure
communication where its work to exchange over Data Transport Layer Security between
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other key server. This system will provide the authentication between the key server in
order to secure the company communication with authorized company to in. The company
can make any transactions move very safe and convincing with their client.

v. Bootstrapping Key Server: Much similar with token security and the communication
security where this bootstrapping key server using authentication key server to secure the
blockchain system activities. Bootstrapping key server is a key server that using new nodes
to contact the bootnodes that synchronized to the blockchain. This can prevent cyberattack
where the bootnodes is used to verify authenticity to allow the user enter the system.
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Previous Research
A previous research that was done is about the security in doing transaction in blockchain. That
research was done by Lee and Kim (2016). According to them, the threats and danger in using
blockchain as a mean for doing transaction made them suggest an inexpensive and secure
verification method as a measure to prevent the consumers to be exposed from lurking dangers.
Lee and Kim proposed that there is a smart grid authentication method using blockchain.
Another research that was done was by Hwa (2016). It was conducted by him to identify the
the difference between current centralised system of traditional bank with the distributed ledger
system of blockchain and how can they decentralised it to adopt blockchain. Since there is a
limit to introduce public blockchain due to legal issues such as data storage location, regulation,
protocol of blockchain exist, it is more convenient to introduce blockchain in the form of
private blockchain or a consortium.
Besides that, according to a study that was done Marc Pilkington (2015), he presented the
concept of distributed public ledger that is used by blockchain and discussed the way how such
system can present risks and drawbacks to the public. He suggested that the current adopted
system of public distributed ledger to be changed to a more secure way of transacting which
was hybrid solutions.
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Suggestion
 Compulsory getting a signature verification for every blockchain transaction, that must
be digitally signed using a public-private cryptography scheme.
 Improve the regulatory clarity on blockchain in term of dispute the resolution
mechanism, the responsible of regulatory agencies and their coordination mechanism
and the legal standing document or the instrument stored on blockchain.
 Scalability and latency limits must be addressed to ensure high-volume applications of
block chain technology such as payments. For payments, discussions around settlement
finality and thus the acceptance of assets on distributed ledgers by central banks and
regulators is fundamental to large-scale adoption.
 Applying the clearing and settlement to have a legal requirement on the blockchain to
ensure the customer or the participant transaction will be guaranteed and safe.

Conclusion
In this era of globalization, technological advancement is needed by industries to pursue
economic goals and blockchain is one of it. The innovative technology that is provided by
blockchain is attracting attention of financial services globally. As we can see in the current
days, blockchain has already been adopted by major sectors in the world as a disruptive force
that can change their way of doing things more efficiently. This technology that is created
forces the way how can financial industry change their processes and operation works as an
organization. However, before blockchain can be adopted to fully there is still a lot of aspect
that must be taken into consideration because this technology is still far from perfect. Based on
the risk involved and the disadvantages, a full scale testing must be done in order to make it
safer and more efficient to all the parties involve including consumers and also employees of
financial services. For this to happen, it requires a lot time and concentration to implement it
into a working system that can minimise risk just as traditional banking does. Over time, it is
expected that this system will grow into a more complex and integrated system that can be used
to benefit the all the parties. In the long run however, this system will lead the financial industry
to be competitive and new jobs can be created, thus improving the economic growth. Majority
of experts when asked said that this system when is it matured enough and fully developed, it
will be adopted into a full scale banking system which is most likely to happen in the near
future.
 18

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