We are positively surrounded by marvels of technology and digitalisation. Electricity lights up our lives, even carries us from point A to point B now. The internet has given us an entirely new and unique era of marketing – the digital era. Smartphones, tablets, and laptops give us the world of information in our very hands, ours for the taking with no hidden costs. Every facet of life imaginable has been fundamentally changed in some way or another, and every technological or digital innovation that has brought it all to life has been of importance. Of all the modern innovations to come to life, however, blockchain is easily one of the most influential – especially when one considers the widespread scale that it functions around and on. Blockchain is a system that makes it possible for digital data to be distributed without being copied. This is a truly impressive feat of technological advancement, and it is one that has already proven its value time and again – and across the board too, not just in its initial focus template.
Put quite simply, blockchain is essentially a series of immutable records which are time-stamped. Multiple computers are used to manage the blockchain, and none of the blockchain is carried through a single digital device. The pieces of digital data (the blocks) are bound to one another using cryptographic principles (the chain). Initially designed to support cryptocurrency, blockchain is now being understood as a key impactor for multiple instances including, as it turns out, syndicated loans. A syndicated loan is a loan that is provided by lenders. Structured, arranged, and carried out by one or multiple commercial or investment banks (also referred to as ‘lead arrangers’), syndicated loans are special, different. It has long been thought that blockchain will revitalise the financial sector on a worldwide level. What is new, however, is the idea of blockchain as foundation for the process of syndicated loans.
When blockchain first started positively blowing up the financial industry, it was exciting for sure. And now, as blockchain is headed as the basis for processing syndicated loans going forward, it is even more thrilling. Recently, the first banks to test it have completed the first syndicated loan process on blockchain. Syndicated loans were first identified as a key use for blockchain in finance when the technology started to gain traction in the beginning. Now, banks are seizing the opportunity to use blockchain technology as a means of cutting costs and speeding up important processes and systems. With the network for the process of syndicated loans through blockchain being effectively secured by user codes, and the information going from A to B being time-stamped, the tech has achieved positive results so far, a promising beginning to what could prove to be a revolutionary innovation in finance.
When the loan contract is signed, a one-of-a-kind identifier is given. This unique code is subtly recorded on the Ethereum blockchain. This is how the blockchain fields its authenticity. Currently still in pilot mode, the tech is expected to roll out more dominantly as it simplifies and speeds up the process more along the way. The results already have been nothing short of astounding. Blockchain simplifies and quickens the syndicated loan process from two weeks down to a few days, if not a single day. Signing loan contracts and documentation can be and is being completed within a few minutes, as opposed to a few hours. This is the power of blockchain. And this is only the beginning for its incredible global reach in the financial sector (and everywhere else, for that matter).
There are many fantastic, credible loan companies out there (think businesses like CashnGo, for instance), and the best part of these financially-backed companies is that they will evolve with the finance industry. This means that, in years to come, the idea of blockchain empowering and revolutionising the way that we apply for and receive loans, leverage payments and monetary influxes, or even just handle our money daily, is going to become not but an idea, but a stark reality. The whole idea, the central promise in blockchain is that it aims to achieve a definitive end to corruption, and the impact that it has had on the financial industry – especially in the case of this current syndicated loan situation – holds a lot of promise towards that ideal. The security, the privacy, and the speed of blockchain gives it a razor-sharp edge.
Digitalisations and technologies run the (modern) world. We live in a world of our own design, and it is truly something to be in awe of. One of the most efficient feats of technological prowess in recent history is none other than blockchain. Designed to carry data across the digital landscape securely and quickly, blockchain has advanced well beyond its initial cause (to serve as the foundation for cryptocurrency). While of course blockchain still functions as the core functioning autopilot for crypto, it is not being recognised for its promise in other areas of the financial sector (like its backing of syndicated loans, for instance). Banks rely on inefficient systems (i.e. faxes and the like) to share data between parties, but now the introduction of blockchain to the processes and systems is set to ignite a new, faster, stronger, and more secure future for loans and other areas of finance.