Why is the use of blockchain effective in the financial services industry?

Part 3 of Celsius CFO Harumi Urata-Thompson’s financial literacy blog series.

As we go through Industrial Revolution #4 (please refer to part 1 and part 2 of my blog series for some of the relevant thoughts), there are a number of emerging technologies and related concepts that we hear about daily. FinTech and blockchain are amongst some of them. FinTech is the term used to refer to innovations in the financial and technology crossover space. Blockchain is a digital system in which an immutable record of transactions is maintained across multiple computers linked in a peer-to-peer network. The beginnings of blockchain technology date back to the mid-’90s (did you know one of the “founding fathers” of the blockchain, Scott Stornetta, is a Celsius advisor?!), and there are arguably many applications to utilize blockchain technology across any and every industry. But, the emerging FinTech sector has been, by far, the most successful implementation of blockchain to date.

I’ve been working in financial services for many years now, and I can tell you from first-hand experience, there is always some kind of new, cutting-edge technology on the cusp of disruption, and this rapid pace of technological acceleration in the financial industry doesn’t show any sign of slowing down soon. So, how is blockchain being utilized in finance, and in what ways is this affecting the ever-growing FinTech revolution?

To learn more about the basics of blockchain and cryptocurrency before reading on, check out our blog: Blockchain, Cryptocurrency, and Transparency — Explained.

Why is blockchain technology effective in FinTech?

Traditional money, such as USD, is printed and tracked by the Federal Reserve — one central authority. Blockchain-based cryptocurrency transactions are verified by an advanced network of computers, thus removing the “trusted central party” handling the end-to-end activities of a given currency, or anything else for that matter.

In a country where the political system is stable and the government or monetary authority is relatively trusted, a centralized management style may be functional. Such a centralized system, however, fails completely when there is instability in the nation, or worse yet, a dictatorship that does not care for the common good of the citizens. But even in countries where capitalism is firmly established, one party having too much control without transparency is not a good thing, fundamentally speaking, especially when transparency into that mediation is lacking. This argument stands true for a traditional financial institution. Banks, just like any other sectors’ companies, went through boom and bust throughout its history. Can we completely trust how the management of these companies deal with our money and data?

In addition to a lack of transparency, there is an accessibility issue within the existing financial infrastructure. Traditional banks have set business hours, for instance. Imagine yourself sitting there with a need to wire some money at 4:01 pm. You have no choice but to wait until the following day. If it is Friday, then a whole weekend is wasted. In addition, the confirmation of all transactions take a few days so if there is a mistake, fraud, or anything else that may require confirmation, we are not even aware of it for a few days. Of course, it is not fair just to point out the issues with the existing institutions, so let me name some of the advantages of banking with the traditional institutions. Physical locations and us knowing exactly what kind of services we can get and what to expect from these long-established institutions.

Introducing blockchain technology allows many possibilities in the industry. Transaction confirmations can be achieved in a few minutes, and activities operate 24/7 (as long as internet access is up and running). The distributed ledger allows trustless operations and eliminates the need to rely on one central authority. This is especially useful in politically or economically unstable countries where authority tends to act on behalf of their own good rather than their citizens or consumers. Also, the lack of heavy infrastructure needs helps reduce costs, resulting in better returns for everyone.

Decentralized finance is coming into the mix, especially nowadays, but this is a topic for another blog.

What does this mean to a company like Celsius?

There are a number of companies that failed post-ICO. Blockgeeks once predicted 99% of the projects would fail and according to news.bitcoin.com, 264 altcoins failed to survive 2018 and roughly 55% of them were comprised of ICOs that were raised in 2017. There are several reasons why these companies failed and will have failed. Two top reasons named were outright project failure and scams. The common theme for both of them is the lack of trustworthy experienced team’s involvement in ICO and management of a project.

So where does that place Celsius in this blockchain-based FinTech world? First, we must have the basics covered. Businesses operating in blockchain, FinTech, or otherwise require excellent management to be successful. And a very young technology like blockchain requires proper nurturing to allow its fruition to evolve effectively. This is a technology that only started being implemented at a consumer level in 2008, and new regulations are developing around this is being written. This requires some finesse on the management side to just to come out of the pack.

A company also has to be able to balance what the technology is capable of versus what the clients’ needs are at any given time. Celsius is led by a team of management consisting of people who are serial entrepreneurs and/or had a number of years of experience in the relevant field, allowing such a delicate mixture to be brought forward.

Celsius is in the business of managing the digital assets that are transferred from our clients into our wallets, make money with them, and pay rewards on each position. Is this a new revenue model? No. The business model itself is something that is already practiced by the existing investment management industry, but this is a new opportunity to introduce a different kind of financial services standard by leveraging decentralized assets to distribute more value to our community. Celsius took a traditional financial model, flipped the equation, and built a blockchain-based platform that rewards its community with profits traditional banks reserve for shareholders and leadership.

What we bring to the economy, using what blockchain enables us, is a financial institution that puts the community first and offers customers the best income because we can keep the expenses minimal. This is also a model to bring the full financial services to truly unbanked part of the world which could, one day, make the cryptocurrency economy a reality for the whole worldwide population. Can we really bring unprecedented financial freedom, economic opportunity and income equality to everyone in the world? We are Celsius. We dream big and will grow with all possibilities that blockchain can unlock for us in the FinTech world and achieve that with our engaging community.

About Harumi Urata-Thompson

Harumi specializes in leading and advising companies on taking innovative paths to achieve strategic, operational and marketing success in their businesses. She serves on the board of directors of several companies and speaks on topics including Artificial Intelligence, Blockchain, Cryptocurrency, Cybersecurity, Outerspace, Cross-border Business, and Diversity & Inclusion. Previously, Harumi was the Chief Operating Officer for CFA Society New York, a nonprofit affiliate of the CFA Institute with 10,000 financial professionals which she successfully completed a turnaround. Before CFA Society New York, Harumi spent 14 years at Thomson Reuters managing various innovation initiatives, business unit and products. Harumi began her career in investment banking with Morgan Stanley and Citigroup, working with fixed income derivatives and mergers & acquisitions. Harumi has an MBA from INSEAD in France and a BA, magna cum laude, in business from Sophia University in Japan. She is a Chartered Financial Analyst, Project Management Professional certified, an Advanced Communicator and Leader of Toastmasters.

About Celsius

Celsius is a democratized reward-earning and crypto lending platform accessible via a mobile app. Built on the belief that financial services should only do what is in the best interests of the community, Celsius is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions. Crypto holders can earn rewards by transferring their coins to their Celsius Wallet and can borrow USD or stablecoins against their crypto collateral at interest rates as low as 1% APR.

Download the Celsius app and start earning rewards on your crypto today!

Stay Connected!

Follow Celsius Network on Facebook, Twitter, LinkedIn, Reddit, Instagram, and YouTube.