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Can Blockchain Replace The Current Credit Scoring System?

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The credit scoring system is nothing new. For years we’ve been told to watch how we spend, to spend only what we have, and to monitor our credit card usage.

The credit scoring system is nothing new. For years we’ve been told to watch how we spend, to spend only what we have, and to monitor our credit card usage. We know that debt—whether school loans, car loans, or medical debt—can be used against us.

With the current credit scoring system, this can mean problems when we want to borrow money or rent an apartment. So what if that system experienced an upheaval? What if blockchain can make that possible?

 

What is Blockchain?

If you’re unfamiliar with blockchain, it’s the creation of Satoshi Nakamoto which is believed to be a pseudonym for a group of people, who are working together under a single name.

Blockchain allows digital information to be easily distributed without making it available to be hacked or copied. Like a digital ledger, new information can be added, but because of how it’s stored, old data cannot be easily altered or deleted.

Blockchain technology began with the creation of Bitcoin, a digital currency. Since then, it has evolved into something much more significant. Blockchain has essentially created a new foundation for improved internet infrastructure.

Is there potential for it to continue evolving until our current credit scoring system is obsolete? It’s a possibility.

You don’t necessarily need to know how Blockchain works to take advantage of it. If you’re curious, though, here are the basics.

 

How Does Blockchain Work?

If you’re at all familiar with computers and the data they host, you know there’s usually one centralized location that stores information. That information is susceptible to hacking, and what’s stored there can quickly become corrupt.

Blockchain changes the way this infrastructure of data works. Rather than one central location where data is housed, the data is duplicated and kept in multiple locations. Regularly updated, the information is no longer available for hackers to invade or corrupt.

Blockchain creates an indeed shared platform. Information is accessible to anyone at any time on the internet.

Like an outdated approach to editing documents in a group, our original understanding of the internet and documentation is limiting. Think of Google docs as an example. As people begin to gravitate toward shared platforms, we become more efficient with both our time and storage space.

Likewise, our understanding of how best to use and store data on the internet is evolving as well.

Blockchain allows for more sophisticated maintenance of information and records. There will be no mistaking whether or not you have the latest version or if some information has been misplaced.

 

What Are the Benefits of Blockchain?

While there are many benefits of using a blockchain style system, there are two highly important ones worth mentioning.

The first benefit is that there is no one single place where information is stored. This also means it has no single point of failure.

Something would have to happen to the millions of computers that have access to the information for it to be lost. It’s highly unlikely that would ever happen.

The second is that no single entity or person has control over inputting or maintaining the information. The information held within blockchain parameters cannot be altered or corrupted easily.

This is, in essence, a public platform, where information can be shared and accessed.

 

What Does All of This Mean for Our Current Credit Scoring System?

We don’t need to get too caught up in the ins and outs of the blockchain system. For now, let’s look at how this technology can change the way we approach credit scores.

Consider that the current (outdated) centralized system in this instance is the bank. The bank has all of your information. If you want to access any of it, you have to go through your bank to retrieve it.

This is the case whether you need the information for a mortgage, a new car, or educational loans.

Once that information is obtained, you then go ahead and pass it on to the party in question. This kind of system means sensitive data passes through many different hands. In this situation, there are multiple moments of vulnerability for the information that keeps your identity—and credit score—protected.

Another problem with this current method is that changes to your credit history are often slow to appear. Quite a bit of trickling down has to happen, to reflect any positive changes you’re making.

Positive changes might have taken place that should be reflected in your credit score. But this isn’t always captured quickly in the information that can be pulled by the bank.

These systems are maintained and passed along by humans. You need to worry about the security of the individual computer networks your information is traveling through. You also need to be concerned about the possibility of human error.

A blockchain system entirely changes how this information is communicated. Data breaches (such as the Equifax hack) can be a thing of the past if we move to Blockchain.

Good credit is one of our most valuable assets. We frequently need to prove our credit history by providing sensitive information. Social security numbers, driver license numbers, passport numbers, and other identifiers are passed back and forth during credit inquiries.

It’s worth repeating that, during the process, we are vulnerable to having information stolen. A traditional system need only have that central computer hacked to gain access or control of information.

Alternatively, a blockchain system requires a hacker gain control of over 50 percent of the network to be successful. It is doubtful to happen—and certainly not without someone noticing.

Using blockchain means credit checks no longer expose or endanger sensitive data. You will have faster, more current results to an inquiry. And at the same time, you won’t be putting your identity at risk of theft.

With blockchain, we can also seamlessly pass information back and forth outside of the existing structures in the United States. In the past, credit histories haven’t been easy to take abroad with you. Moving to a new country could result in needing to start over entirely, regarding establishing your credit.

Blockchain technology allows for a global credit platform. You’ll no longer be confined to a single country, and can take your credit history with you wherever you go. In today’s “global village” of a world, this kind of flexibility is extremely useful.

 

Who Does Blockchain Benefit?

The changes blockchain brings with it can impact everyone. However, some pockets of the population will reap more significant benefits from the transition. Those groups of people are minorities, youth, and those who are underbanked.

In a rapidly changing economic environment, these groups need more help than they ever have before. In recent decades, the entire backdrop for our financial system has experienced upheaval.

The cost of real estate and education are growing much faster than pay rates. Young adults are finding themselves saddled with more financial debt and worry. They have also noticed they aren’t in control of their credit history.

Large credit bureaus, like Equifax, aren’t viewing the average person as their client. Instead, the company sees that person’s information as something to share with other banks and lenders. Far from a client, the person in question becomes a commodity to be used as the firm sees fit.

Moving toward a blockchain system for credit scores will allow people to take back some of the control. Not only can they see and maintain their credit information, but they can also disseminate it as they see fit.

In the post-Equifax environment, two things have become increasingly apparent. The first is that the bulk of our credit information shouldn’t be stored on credit bureau systems. The second is that social security numbers shouldn’t be used as a primary identification tool.

Before the Equifax hack, there was limited interest in moving toward a blockchain credit storing system. There was a strong inclination not to change something that had been working for so long.

The Equifax breach brought home the fact that this system isn’t working quite as well as it was thought to have been. There are, however, still some things that need to be addressed in the blockchain system—speed and expense are both issues. Even so, a future involving blockchain looks mighty bright.

 

The Future of the Credit Scoring System

It’s not likely that the traditional credit scoring system is going to fade out into nothing overnight. The big names in the industry are most likely going to be around for a while to come.

There’s still a lot of work to do with the blockchain platform before we can access all the advantages that come along with it.

It’s promising that this push toward a blockchain credit scoring system can allow for less identity theft. Individuals will have more control over their information and who has access to it.

With some adjustments and improvements, a blockchain system might revitalize our understanding of credit scoring and share entirely.

Keep your eye on the blockchain system and how it continues to evolve. You may be pleasantly surprised by the overhaul our credit scoring system could experience shortly.

 

Guest Post by John Blakely

John Blakely has had a passion for all things personal finance for over a decade. He is a firm believer in having big financial dreams and executing on a plan to realize them. He is an Education Ambassador for ScoreSense, where you can find more of his writings.

#Bakkt

Is Bakkt the last hope for Bitcoin?

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To compete in the fast-growing crypto space, ICE, the organization responsible for the smooth working of famous NYSE came up with a product titled Bakkt.

2018 proved to be a devastating year for Bitcoin. The price of the cryptocurrency went down to almost 3/4 of what it was while entering 2018. Now, with 2019 already making up in 2019, Bitcoin hopes for regaining itself. It is looking up for every method which could lead it to enhance itself to its desired position in crypto space. In this process, Bakkt seems to be the last hope for Bitcoin. In this article, let us focus on the factors which enable us to conclude that Bakkt is the last hope to Bitcoin to regain its superiority in the crypto space.

 

Bakkt:

To compete in the fast-growing crypto space, ICE (Intercontinental Exchange), the organization responsible for the smooth working of famous NYSE (New York Stock Exchange) came up with a product titled Bakkt. No one can doubt the experience that ICE has when it comes to operating security as it has been owning and running various other exchanges too. So, the safety and operations of Bakkt are never in a region of doubt in crypto space.

 

What makes Bakkt different from other competitors?:

Microsoft was the first colossal company that collaborated with this product from ICE. ICE made an official statement in mid-2018 about this. The main aim of this collaboration was to create an open and legal environment for a digital property with the help of the Microsoft cloud. This collaboration is a game-changing move made by Bakkt.

Apart from Microsoft, there are some other big companies like Starbucks, BCG,  Pantera Capital, etc. who support this exchange. Even Starbuck has started to allow its audience to buy some of its products via bitcoin with the help of Bakkt.

 

How Bakkt appears to be the last hope for bitcoin?:

There are several indications and feature regarding Bakkt which lead the trade analyst to predict that it could work as a catalyst to help the crypto space to reach its desired positions. Bakkt aims to provide a wide range of facilities which may uplift bitcoin in the future. Let us have a glance at the factors which may lead us to conclude that Bakkt is the last hope of bitcoin:

 

1. Main Features of Bakkt:

Three main features which are meant to be provided by Bakkt are: Efficient, Seamless and Secure. Bakkt is designed to provide a non-stop service to buy, store, sell and spend on the digital property to its customers. It aims to collaborate the blockchain to the infrastructure and the existing market to provide efficient, trust and security. This is undoubtedly going to enhance the use and price of bitcoin.

 

2. Aimed market space of Bakkt:

Bakkt aims to provide its service throughout the entire crypto space from a single consumer to prominent giant merchants. BCG, Starbucks, Microsoft, Protocol Ventures, Alan Howard are some of the big names which have been using the service of this ICE product. Starbuck has even started converting the bitcoin paid by its customers into US dollars using this product.

According to Bakkt, even though the crypto space has been expanded so huge, there still is a large potential of the transformation of the digital assets into the financial market.

 

3. Potential to bring mainstream acceptance:

Mainstream acceptance is the hardest thing to achieve in the crypto market. This is what in which the crypto space has been struggling with. The private storage company sold a lot of cases having headlines such as credential data of digital assets for their profit and greed ignoring the privacy they promised to provide or the sudden decisions and movements made by banks lead few to lose all their savings etc. Somewhere the concerns mentioned above were a part of the severe loss that crypto space suffered in the last few months.

Somewhere, people have faith in Bakkt which is a company of ICE. People are already aware of the managing power and capacity of ICE. Further, the brand of Microsoft for storage is somewhat most of the people can trust in for the security and privacy of their credential data. So, combining both factors, people may have faith in this new product to overcome the bottleneck that leads people to suffer last year. Undoubtedly, Bakkt has the potential to bring mainstream acceptance.

 

4. Potential expansion and growth in the market:

Bakkt is continuously attracting small as well big organizations towards itself, and it was still possible to grow further. Microsoft, being itself one of the trusted and popular software provider of the world, more and more smaller developers will embed the Bakkt to make their software more reliable. The brand and trust of Microsoft will undoubtedly increase the attraction of developers towards Bakkt. This all lead to expansion and growth of Bakkt and eventually, securing the future of Bitcoin and strengthening it.

 

5. Potential conversion of Bitcoin to common currency:

Bakkt not only monitors the change in the price and the movement of trade of bitcoin but also will try to trade the cryptocurrency. This is what new Bakkt has come with and is attracting the people once again towards itself. Bakkt aims at finding a secured price conversion of the digital asset like bitcoin to a financial asset like common financial market currency and if this conversion expanded as expected by Bakkt. Bitcoin will rise to a height never seen before.

 

Conclusion: Well, it is never easy to predict the future and especially in crypto space. No one had ever predicted to the downfall of bitcoin to such a depth in 2018. But still, a conclusion can be made that Bakkt is the product that the crypto space was aiming for a long time to more exploration into the market. Being a product of an organization which owns the world’s largest stock exchange and having the support of trustable companies like Microsoft is what that can bring the acceptance of bitcoin into the market once again. Considering the above-mentioned points, it would not be wrong to state that if there is any last hope for bitcoin, then it is Bakkt.

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Top 10 Friendly Countries for Blockchain Startups

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While some countries are allowing blockchain startups to set up legally, while some are in no mood. Here are the top 10 countries for blockchain startups.

Blockchain has been a revolution in the digital market for the last couple of years. It has occupied an important place in the digital currency revolution. The growth of technology has touched various fields such as smartphones, vehicles, shipping and a small sector in the sector of banking.

Although there is no country in the world which is not aware of this technology, there is a huge difference of opinion among countries regarding this revolution. There are various factors a blockchain startup has to look up before deciding it as a host country such as the jurisdiction regulations of the country, political views, tax system etc as these factors are going to affect the growth of any startup. While some countries are allowing blockchain startups to set up legally, while some are in no mood for any such beginning in the country and there are also some countries which are not sure about it.

 

Let us take a glance at the top 10 friendly countries for blockchain startups:

 

1. Malta:

This small Mediterranean country is on the verge of becoming the ‘island of blockchains’. The beginning of all these was when the biggest cryptocurrency exchange of world, Binance chose to inaugurate its office in this country. Also, they have informed all to set up a ‘crypto’ bank on this island.

Malta has been improving and enhancing new regulations that are friendly for blockchain startups. The country is so much dedicated to this technology that even the head of the country, the Prime Minister has predicted that the country will be the best place for this kind of startups throughout the world. The regulations are mainly focussed to evolve and encourage the investors to start this kind of projects in the country.

 

2. Switzerland:

The settling up of a crypto valley in one of its town, Zug, is sufficient to describe how much amiable this country to blockchain startups. It is one of the famous center of blockchain technology across the globe. Adding to the ice, they have imposed a tax-free regulation for the investors who want to invest in this kind of startups. Apart from it, their laws and regulations are very attractive and appreciated by investors as well as developers.

It has been the host of several blockchain projects including DFINITY, Xapo and of course, Ethereum. The privacy rules and protection of data are also appreciated by the blockchain startups.

 

3. Japan:

Japan is one of those countries which have approved cryptocurrency such as Bitcoin as a legal tender. It has been home of several blockchain traders, even some of the stores in the country have no problem in taking payments from users as Bitcoin currency. After six months of recognizance of cryptocurrency as legal, Japan is now accountable for more than half of total such trades.

Although there are various regulations regarding blockchain startups, they are friendly and easy to be acceptable and it’s not difficult to stary sich any startup in the country.

 

4. Singapore:

This country is a home of a huge number of triumphant startups in the field of blockchain technology. This country is nearer to two super giant technology rival countries Japan as well as China which makes it a more suitable center for startup of blockchains. The rules and regulations of this country are also very amiable and favorable bt the cryptocurrency. It has already a lot of exchanges of blockchain currency. So if a blockchain startup is willing to start and want to be in touch of both China and Japan clients and government, Singapore is the best country.

 

5. Belarus:

Two years back itself in 2017, this country made several rules and regulation affecting blockchain and crypto industry. As per these laws, they have made these digital currencies as the legal one in the country. The restrictions in the trade related to blockchain technologies are so friendly that the investors almost feel free to start any such startup or invest in this kind of organizations. Also, as per the rules, these kinds of trades are tax-free in the country until 2023. Due to the friendly rules and success, it is one of the preferable countries for blockchain startups.

 

6. Estonia:

Estonia is a developing country which has always tried to adopt new technologies in order for the benefits of the people and finance of the country. It has imposed several acts that attract the investors of the country as well as other countries to set up a blockchain startup in this country. It has declared itself to be a remarkable country in blockchain technology very soon. Also, they have established a new kind of citizenship known as e-residency which also attracts blockchain startups.

 

7. South Africa:

This country has depicted a tremendous interest in blockchain technology. They have made the crypto transactions as legalized one in the country. They have made several initiatives in order to attract the investors to start such startup in South Africa. The rules and regulation related to this crypto market in this country are also not so harsh, they always tend to welcome these industries. It is becoming as one of the most profitable countries for blockchain startups in Africa subcontinent.

 

8. Denmark:

Denmark has already announced a regulation stating complete relaxation in tax for any kind of blockchain trade. It is one of the most amiable countries for welcoming these types of startups in the country. The rules of the country are very friendly for the crypto industry making it one the interest for blockchain startups.

 

9. United States:

When it comes to adopting new technology in the market, this country is always in the front. The rules and regulations vary across different states of the country. Despite the oppose in some state, there are Bitcoin ATMs in the country. The friendly states of the county, Montana, Texas, etc. have very amiable regulations while welcoming the blockchain startups. Apart from it, no other country in the world can be better for any technology to start other than the US itself.

 

10. United Arab Emirates (UAE):

This Arabian country is also one of the most friendly nations. They have already used their own digital currency since 2016 and now welcoming global cryptocurrencies. The jurisdiction is very cooperative towards the blockchain and crypto industry. They are planning to be the first country in the world as a government powered by blockchain by next year. Due to these reasons, UAE is also one of the most preferable countries for blockchain startup.

 

The market conditions of countries continue changes. The expansion of crypto and interest in blockchain startups is so high that many countries are willing to accept it in their country. There are various factors to establish the startup in the country and initial requirement would be an amiable regulation and legalization. Apart from above-mentioned countries, UK, Sweden, China, South Korea etc. are also preferable.

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2019 Blockchain Adoption: The Next Cryptocurrency Price Catalyst

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Let have a look at recent survey statistics from Deloitte's report related to blockchain technology and see how it will affect the cryptocurrency market.

Industries that we never thought would be disrupted, will be disrupted massively and the company executives know it and they want to be ahead of the curve and find ways to not be disrupted out of their business. Blockchain has got a lot of amazing applications and uses cases but at the same time blockchain will not solve all of the world’s problems. It can certainly go along way towards solving quite a few of them which is amazing as a tool.

 

Let have a look at some of the recent survey statistics from a report from Deloitte related to blockchain technology:

  • Around 95% of the companies surveyed say that their company plans to invest in blockchain technology in 2019.
  • With 16% of the company executives surveyed said that they are planning on investing $10 million or more into blockchain technology in 2019.
  • 84% believe that blockchain technology is broadly scalable and will eventually achieve mainstream adoption.
  • 68% of the executives polled also believed that they will lose a competitive advantage if they don’t implement blockchain technology.
  • 59% of people who were polled believe that blockchain will disrupt their industry.
  • 39% of the people viewed blockchain as being overhyped.
  • The executives who are most interested in blockchain technology by industry are Automotive industry: 73%, Oil and Gas industry: 72%, Live Sciences: 72% being the most bullish on blockchain technology.
  • 84% of executives polled expect blockchain to provide more security than conventional IT systems.
  • 32% of executives expect greater speed.
  • 28% of executives are looking for new revenue models.
  • Only 2% perceive no significant advantage of blockchain over existing systems.
  • 42% of surveyed view blockchain as a critical strategic priority for their organization.
  • According to 39% of people surveyed, regulatory issues present the greatest barrier to further investment in blockchain technology.
  • 37% of executives are more concerned with the actual implementation of the technology. Citing things like lack of in-house understanding of how to implement blockchain technology.
  • 45% of companies are considered to be likely to join a blockchain consortium with competitors while 29% are already a part of a blockchain consortium.
  • 52% of companies are focused on permissioned blockchains. So we are going to see a lot of permissioned blockchains within companies so that’s not surprising but 44% are prioritizing public blockchains.

 

There are going to be a lot of companies that don’t really do very much in terms of buying bitcoin or any other cryptocurrency but there are will be a lot of companies that will because the use case for public blockchain is very real and the use case for value transfer is very real and companies recognize that. Some of the biggest use cases that companies are looking at are supply chain, internet of things and digital identity. A lot of that has very strong value on public blockchains in particular. So public blockchains such as bitcoin will see a lot of use.

If we assume that as surveyed, 44% of the world’s top 1000 businesses start using pubic blockchains such as bitcoin and ethereum on a regular basis. What do you think that is going to do for the price and adoption?

The United States is lagging behind overall, especially behind the other nations, particularly which were polled: China, Canada, Germany. Going back to the regulatory concerns which are probably holding back a lot of American executives from getting more into blockchain technology particularly into public crypto assets such as bitcoin or ethereum. The report from Deloitte finishes up saying that blockchain is not ready for prime time yet, it is getting closer to its break out moment every day. The report states the momentum is shifting from a focus on learning and exploring the potential of the technology to identifying and building practical business applications.

If we go back to when the internet started and invest in companies that became the big things, that’s what we have right now with cryptocurrencies. Though there will be companies that won’t need crypto assets themselves, they’ll be using blockchain technology but we are going to have a lot of companies which are going to be using these public blockchains for a wide range of use cases. This is going to be the new internet of value and the future of the web and cryptocurrencies are going to play a very strong part in that. The crypto markets are just these powder cakes ready to blow. We have institutional investors coming in, we have better infrastructure than we have ever had before for the crypto industry and businesses are using and investing in blockchain technology.

 

Let us know your opinion on the Deloitte’s report in the comments section below.

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