The Benefits Of Blockchain & The Aventus Network For Financial Services

The old world of finance is in an innovation arms race to keep up with the changing pace of the digital world and new disruptive technologies. The most promising of these new technologies is blockchain, and nowhere is the opportunity for blockchain greater than in the financial services sector. According to IHS Markit, the “finance industry blockchain market will reach $462bn by 2030.”

The benefit of blockchain is that it lets financial institutions operate at a substantially increased pace and a lower cost, with reduced risk and vulnerability to security hacks. We may very quickly find that blockchain ignites an unstoppable influence on the global economic system comparable to the impact of the internet in the mid 90s.

Financial services firms that are first to act will find themselves at a distinct advantage in the race to innovate, increase market share, and enter new markets.

Problems Blockchain can Solve

There are countless expensive processes that financial institutions could replace with blockchain. Post-trade reconciliation and settlement are obvious examples of time-consuming and costly legacy processes that are ripe for innovation. For example, the guide rails for international transfers were built in the 70s — nearly 50 years ago.

Finance also suffers from issues of complexity regarding processes where multiple stakeholders are involved. In the case of syndicated loans, for example, not only are costs, clearing, and settlement an issue, but the problems compound with the challenges of paper-driven documentation and a systemic absence of transparency.

Currently, processes require excessive manual processing in aggregating, amending and sharing data. Regulatory reporting and audit documents are labour-intensive tasks, too. Soon, however, the days of manual processes and transactions passing through multiple intermediaries, each who take their cut, will be long gone.

Financial services firms are adopting blockchain technology to reduce times and costs around regulations like KYC, AML, and they’re using it to open up new markets with the digitisation and tokenisation of asset transactions — bypassing traditional intermediaries and their fees.

It may sound like a panacea, but it is no stretch to state that blockchain technology is fulfilling its promise of revitalising finance by reducing the need for manual intervention, so financial firms can focus exclusively on value-added actions.

The Benefits Of Blockchain For Financial Institutions

The potential for blockchain in financial services is enormous with multiple applications covering payments, asset management, securities exchanges, capital markets, and more.

According to one FinTech study by Santander, blockchain is expected to reduce the cost of financial services infrastructure by as much as $20 billion per year by 2022 as it replaces outdated IT systems and processes. The digitisation of financial assets — smart contracts and programmable money — benefits financial firms at every level where transactions are involved. These include:

• Trust: For many blockchain enthusiasts, the idea of a trustless world holds the highest appeal. Digitisation of assets on blockchain ensures the integrity of data and lets you easily view asset provenance and history without worrying about fraud.
• Access to new products and markets: Reduced costs, fewer intermediaries, automation, fractionalisation, and security make it easier for financial firms to profitably service new markets with new products.
• Programmable securities: Built into your smart contracts you can code that for governance and compliance, data privacy, KYC/AML, and more to effectively manage your assets from day one.
• Automated processes: Real-time settlement, audits and reporting, a reduction in error and fewer steps in the transaction process, blockchain lets you act and react almost instantly.
• Market reactivity: Digital securities allow greater customisation than standardised securities, and can be issued within shorter timeframes. Issuers can create bespoke digital financial instruments directly matched to investor demand.

The Digitisation of Assets

Awakened to the benefits of blockchain, there is now a land grab for the mass-affluent market as Financial services firms can harness the technology to provide products and services at a profit to previously underserved markets.

The digitalisation of valued assets is a growing trend and perhaps the single biggest use case for blockchain. The transaction of digital assets is where one digitises financial assets on the blockchain to facilitate quick, cheap, and highly secure transactions without the need of intermediaries. This drastically lowers transactional costs while simultaneously removing counter-party risk almost entirely.

According to Francesco Roda, chief risk officer at Koine Finance and co-founder of Starling Bank, it is the scale and cost-effectiveness of digital transactions that “enhances the liquidity profile of what typically have been very illiquid assets”.

The Aventus Network is playing a key role in helping financial services firms transact financial assets digitally almost instantly — at a fraction of the typical cost. The Ethereum network has long been the network of choice for financial services firms wishing to transact digital assets for its excellent security.

However, Etheruem has significant drawbacks that require a second-layer solution on top of it to give financial firms the scale, speed, and cost economies they require.

Problems with the Ethereum Network

At Aventus, we love Ethereum. It’s why we built our second-layer solution on top of it. However, Ethereum has become a victim of its own success. Ethereum has scalability issues that make it a victim of its own success.

As the blockchain network of choice for most businesses, its maximum transaction throughput is wildly insufficient in meeting demand. The economics of supply and demand have thus skyrocketed transaction fees making them prohibitively expensive.

Ethereum is an open, public blockchain. It’s perfectly secure for that reason. However, it lacks scalability and speed. At the time of writing, transaction fees can often cost more than $100 per transaction.

How Aventus Makes it Better for Financial Services
Firms to Transact Assets Gigitally on Ethereum

The Aventus Network is a layer 2 blockchain that brings scalability, lower costs, and speed to Ethereum transactions.

The Aventus Network (AvN) solves Ethereum’s problems by letting businesses build on top of the Ethereum network with Aventus’ second-layer protocol. With the AvN, applications can easily work with any other promising blockchain tech, cross-chain, by plugging into the Polkadot ecosystem, building on Substrate.

Using the Aventus Token (AVT) to manage transaction costs, financial services firms can transact assets at scale, securely, without intermediaries, for just 1 cent per transaction paid in AVT.

This is only possible thanks to the Aventus Network combining the scalability and speed of a permissioned, private blockchain with the security and interoperability of the Ethereum public blockchain.

The Aventus Network has countless applications in financial assets management from traditional to digital markets. Through the digitisation of assets, the AvN, can drastically improve settlement times and auditability. With new markets like decentralised finance growing rapidly — with more than $13.6bn in contributed assets in 2020 — use cases here are promising.

The Benefits of Transacting Digital Financial
Assets on the Aventus Network

Having launched with more than 8.5m historical transactions to date, the Aventus Network can offer financial services firms a secure way to transact their financial assets at scale and at a fraction of the typical cost.

Imagine, for example, being able to securely transact financial assets digitally, at scale, at a cost of just 1 cent per transaction. With the Aventus Network (AvN) you can.

Scale

The Aventus Network (AvN) can theoretically scale to 2,000 transactions per second. This is 133 times more than Ethereum.

Price

The average transaction cost on the Aventus Network will begin at just $0.01 (paid in AVT) and decrease over time. This is 99% cheaper than the average Ethereum transaction fee over the past year.

Speed

The AvN will process a token transfer within 0.13 seconds. This is 100 times faster than the Ethereum blockchain.

Enterprise Grade

The AvN will onboard a minimum of 8.5 million client transactions that have been active in private test networks throughout the past year.

The fact is that nowhere is the pace of technological progress faster than in blockchain. Depending on your rate of adoption, this new world of digital assets — physical commodities digitally represented and transacted on blockchain — your greatest opportunity.

To talk with the Aventus team about how the Aventus Network could work for you, please visit https://www.aventus.io/contact/.

An Aventus Network Case Study

Aventus helped CashbackAPP increase their net margins by as much as 25% in just 6 months in multiple business jurisdictions.

As a business that gives users cashback on purchases, they were able to restructure their loyalty debt obligation on their balance sheet, reduce transaction fees, and improve treasury management while providing customers with more prompt payment.

To talk with the Aventus team about how the Aventus Network could work for you, please visit https://www.aventus.io/contact/.