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Blockchain in Banking Industry

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 Blockchain Revolution in Banking Industry
Thulya Palihapitiya
Department of Information Technology
Faculty of Information Technology
University of Moratuwa
Moratuwa, Sri Lanka
[email protected]

Abstract— today, banks are affected by economic and digital limitations and future improvements of Blockchain System.
transformation, financial innovations and development of Section VI provide a discussion on what are the challenges we
internet. Blockchain technology with cryptocurrency is have to faced when Blockchain adopt in Sri Lanka and what
underlying technology with promising application in the banking are the solutions to overcome that challenges. Section VII
sector. Therefore, Aim of this paper is to do a research with the
gives conclusion about this article, Blockchain revolution in
impact of Blockchain platform in the banking industry. To
understand this technology, this research is to analyze technology banking industry.
functions with the model and anatomy of Blockchain
architecture. Many researches for Blockchain technology are
carried out consensus algorithms and four of them are discussed II. BLOCKCHAIN ARCHITECTURE
on this paper. How banking industry deal with this platform with
advantages and limitations are mainly discussed in this paper. A. Model of Blockchain
A blockchain is a digital, decentralized, immutable and
Keywords—Blockchain;FinTech; Decentralization; Bitcoin; distributed ledger that record transactions near real time.
Banking industry; Cryptocurrency; P2P; Consensus; Blockchain is as a kind of ledger or spreadsheet, which power
a peer-to-peer (P2P) network to validate and verify each
I. INTRODUCTION transactions[1]. This blockchain system consist N number of
Today, banks are continuously exploring new ways to do nodes which are interconnected together on a commonly
transactions quicker for enhanced customer services by accepted protocol, thereby creating a continuous mechanism
assuring transparency to customers and regulators while of control regarding errors, manipulation and data quality.
ensuring cost efficiency[5]. Blockchain is an essential This maintains continuously growing list of records called
technology with promising application scenarios in banking ‘Blocks’.
industry nowadays. It can transform banking industry and Blocks in a blockchain can identified with the help of hash in
make process more democratic, transparent secure and the block header which is generated with the help of SHA256
efficient. Blockchain is a technology that combine several algorithm (bitcoin)[3]. This hash function is developed using a
technologies like distributed data storage, consensus mathematical algorithm that maps arbitrary size data into 32
mechanism, point-to-point transmission and encryption byte string[2]. These blocks are data structures which helps to
algorithms. A Blockchain act as decentralized ledger that bring transactions to be included in the public ledger. The
keeps track of transactions between two parties effectively. header of the block consists index, Hash, previous hash,
Although these parties have simultaneous access to update timestamp and nonce. Complete summary of transactions
digital ledger constant and system virtually impossible to stored as array in the body of the block. Figure 1 illustrate how
hack. hash value and previous block hash value link to each other.
Blockchain will influence for end of money via bitcoin and
other cryptocurrencies in Banking industry. More than 90
central banks involved in Blockchain globally and 80% of
banks predicted to initiate Blockchain with distributed ledger
technology[1]. So most of the banks on its way to establish
blockchain use cases to create huge revolution in banking
sector by giving signals of end of traditional banking.
This paper outlined as follows. Section I gives an introduction
about how blockchain going to revolutionize the banking
industry. Section II explain Blockchain architecture, model of
Blockchain, how Blockchain works with consensus algorithm.
Section III discusses performance and use cases in banking
industry. Section IV discuss how impact of blockchain on Figure 1: How hash value and previous block hash value link
FinTech and Cryptocurrency. Section V provides details about to each blocks in blockchain.
The first block of a blockchain is called as genesis block and it
contains its transactions with a unique hash value. This hash
C. How blockchain works
and the all new transaction data are used in the next block in
the chain. That means each block links to previous block Figure 2 explains how a blockchain works in a transaction
through its hash. In this ways transactions can be added safely. below:
They are secured from tampering and revision. Each block
contains a timestamp and liked to the previous block by using
secure Hash Algorithm [3]. So if someone change the data of a
block, its hash value also changed. Then it’s effected for the
next block because it contains the hash of previous value.
Therefore any one cannot change transaction data of block.
The main advantage is that Blockchain uses cryptography,
which allows users to modify the transactions on a secured
network. If majority of nodes or participants agree that the
transaction performed looks valid transaction information
which matched with the blockchain’s transaction history, then
new block will be added to the chain. These configurations are
divided depend on the type and the size of the network and the
use case.

B. Classification of Blockchain system. Figure 2: How a Blockchain works [1]

There are three types of Blockchain systems. They are as 1. A node of the network start a transaction by creating
follows: and then digitally sign with its private key.
1) Public Blockchain 2. The transaction is represented as a block.
This provides an open platform for people from 3. The block is broadcast to the every participants in the
various financial organizations like banks and P2P network.
backgrounds to join, transact and mine by 4. The transaction is propagated by using Gossip
decentralized consensus mechanisms. There are no protocol, to participants to validate the transaction
restrictions. So they are called as ‘Permission less’ based on data and history of transaction. More than
blockchains[2]. Blockchain is specific to the user 50% of nodes are required to verify the
without specific validator nodes. All the participants transaction[6].
have power to write and read transactions, and 5. When the transaction is verified and validated block
perform auditing and view transactions of the can be added to the blockchain.
blockchain. 6. Newly created block now becomes a part of the
2) Private Blockchain ledger and money (cryptography like bitcoin) moves
These systems facilitate exchange of data and private to the other party.
sharing and among a group of individuals or selected
people or multiple organizations controlled by
selective individuals or one organization. These D. Anatomy of a Blockchain Transaction
blockchain systems are called as permissioned Below diagram shows how a transaction between two parties
Blockchain.[2] Therefore unauthorized access can’t occurs algorithmically through distributed ledger technology.
do, without any special permission. Each and every
node maintaining a copy of the ledger to reach a
consensus, but unlike public blockchain the writes
are restricted.
3) Consortium Blockchain
This blockchain system can be considered as partially
private and permissioned blockchain, not a single
organization or person but a set of pre-determined
nodes are[2] responsible for consensus and block
validation. Nodes decide who can join the network
and mine data. . This is not a fully centralized system,
but it has the ability to control some selected
validator participants or peers. There are some
limited ability to read and write transactions. These
nodes does not guarantee immutability and Figure 3: Anatomy of a blockchain Transaction [1]
irreversibility.
The Blockchain architecture consists four concepts as
decentralization, digital signature, data mining and data
integrity.
1) Decentralization: Blockchain distributes control
among all the participants or peers in the chain and
creating a shared infrastructure.
2) Digital signature: An exchange of transactional value
using public keys by the mechanism of a unique
digital sign enabled by Blockchain. All the
participants in the network known the code for
decryption. Private keys known only to the owner to
create ownership.
3) Mining: Every users in the system mines and digs
data which is evaluated according to the Figure 4: How the hash value create for each block
cryptographic rules. This is also acknowledges
miners for confirmation and verification of the In this process computer is check the function by incrementing
transactions. random integer (nonce) until it find the right Hash [24]. To
4) Data integrity: Algorithms and agreements among find the correct Hash value we have to create large number of
participants ensure that the transaction data, once hashes. This process increase the security of transaction,
agreed cannot be tampered [1]. Data stored in the because POW ensure that without executing work, any block
system act as a one version for all parties while cannot add to the blockchain.
reducing risk of fraud.
2) Proof of Stake (PoS)
E. Consensus Algorithm POS is the commonly used consensus algorithm to validate
Consensus Algorithms involve to make decisions for the blocks in a blockchain. The main benefits are security,
individuals of the network. These are helps to create equality decentralization and energy efficiency. By using random
and fair in Blockchain. Following algorithms helps to achieve system, check whether who is the designer of the next block
consensus in a Blockchain network. by checking history of transactions like how much
cryptocurrency have and how long the creator hold these
currency (wealth of the creator) . Coin age is a method to
1) Proof-of-Work (POW) select the next block creator by counting the time participants
This is proposed by Satoshi (blockchain creator) to achieve hold cryptocurrencies [24]. Therefore POS system encourages
security and consistency of bitcoin network. Proof of work participants to takepart in the system through providing ability
used for bitcoin transactions. Ethereum is also used, but it was to control the network.
replaced by using Proof of Stake algorithm. POW is an
algorithm which makes time consuming and expensive, but it 3) Delegated Proof of Stake(DPoS)
helps participants to check whether the data is correct or not.
Bitcoin using HashCash POW system. DPoS is a consensus protocol to validate transactions via the
In this process we should define hash function and nonce. network. This is system using realtime voting to achieve
Nonce is a random number and in Bitcoin it can be a number consensus by placing their tokens. Every node has the
between 0 and 4294967296[15]. Hash is a complex algorithm authority to influence to the network. This power is also called
which converted arbitrary size data into string. Each and every as voting weight, and decide how many base token, participant
Block has a specific Hash value, we should take it and add to is holding. In some versions they have to deposit some amount
the new block of transactions. Next take the nonce value and to secure their account. That is called as deposit based PoS.
add it to the end of the block of text. Now we have big block selected delegators are awarded with fee for every valid
of text with previous block hash and nonce and new transaction. But anyone cannot change transaction details and
transactions. Then computer takes around 10 minutes to do if they changed the details they loss DPoS. They should have
10n21 computations to find the string value with number of 24-7/365 stable server [5].
zeroes in front it. In Bitcoin we used SHA-256 Hash algorithm There are more advantages than PoW and PoS. DPoS systems
to perform Hash function [2]. As an example, we take are more scalable and faster than PoW and PoS. this
00000000000000000028c91a95cd6a5b6cbd913c203510eab26 environment friendly system with more energy. This is the
9208df6c64091 with 18 zeros as the hash value of previous most decentralized system with strong security protection.
block. Therefore we have to get the hash value for new block Bigger holders have more votes than others, they can think
with 18 zeros (same number of starting zeroes) in front of the that their votes cannot gives benefit to them is a limitation of
string [5]. The below figure simply shows how to take the this system.
string correctly with 18 zeros infront of the string by using
correct random value.
 4) Practical Byzantine Fault Tolerence (PBFT) Table 1: Impact of the Blockchain technology
This algorithm was proposed as a solution of Byzantine
Features Assessment Impact of
Generals problem. This algorithm can apply only for public
Framework Blockchain Fit
blockchain system or the permissioned systems. The purpose
Intermediary • High fees for Blockchain's
of this algorithm is to eliminate failures by influencing intermediary? distributed ledger
malicious participants by manipulating messages from special • Latency due to technology
participants in the network. PBFT was designed for processing through facilitates
asynchronous systems [24]. All participants (node) have the intermediary? disintermediation,
ability to communicate each other and create an agreement • Does the thereby reducing
using majority [10]. Messages which are sent from the specific intermediary exist costs and lowering
node should verify by the participant that they are not due to lack of trust? latency.
modified during the transaction period. Below diagram simply Transparency • Are multiple The hash/ pointers of
shows how Practical Byzantine Fault Tolerence Algorithm participants the records written
involved? on the Blockchain
count messages. • Does increase in are immutable and
transparency into the irreversible, not
transaction help the allowing
participants modifications and
eliminating risk of
fraud.

Information Storage • Is the same Blockchain's

information being distributed ledger
stored in multiple and consensus
locations? mechanism allows
• Is data consistency data consistency
an issue? across multiple
participants
Manual Processing • Does the process Blockchain
involve manual maintains automated
operations? audit trail of
• Is the cost of transactions, thereby
Reconciliation high? reducing manual
processing for data
validations and
Figure 5: How pBFT message count reconciliations
Trust • Is there trust Smart contracts
among participants? allow codification of
• Do multiple business rules,
III. PERFORMANCE AND USE CASES IN BANKING INDUSTRY participants have the validations and
Today Banking industry faced with issues like rising cost of right to modify reconciliation,
transactions? thereby reducing
operations, fraudulent attacks on centralized servers and
• Is there a risk of manual processing.
ensuring transparency of the transactions. Most of the banking fraudulent
transactions depend on manual processing and documentation, transactions?
involve with intermediaries and time consuming. Blockchain Documentation • Is the Smart contracts
provides solutions for banks as it helps to eliminate documentation allow business
intermediaries’ transactions and facilitates real-time paper-based? validations and
cryptography transactions. So most of the banks adopted this • Is there a large automated
technology and increased their profit. Following evaluation number of reconciliation for
factors uncovers a pain point in the current state process, documents / reports straight through
which could be resolved by a feature of the Blockchain required to be processing.
generated?
solution. Impact of block chain technology summarized as
Time Sensitivity • Will the Blockchain enables
below: transactions benefit the near real-time
from being real-time settlement of
or synchronous? recorded
transactions,
reducing risk and
providing an
enhanced customer
experience.
 6. Smart contracts: Smart contracts are set of code
which stored in Blockchain. These programs execute
A. Blockchain Transformation of Banking services
automatically when conditions are met. They are
Blockchain technology promises huge opportunity to recover perform cryptographic transactions, transparency
the challenges in banking industry. There are several use cases without intermediaries because of the decentralized
with advantages and limitations with blockchain technology. ledger in blockchain.
1. Payments : These are the important usecase of any 7. KYC (Know Your Customer): Traditional KYC
financial and banking systams. Both coomercial and process use lot of time to perform individually in all
central banks are going to use this blockchain banks and other financial institutions. Using
technology for payment process. These are important Blockchain, independent verification of each
for cross boarder payments, without third party customer of one bank can be accessible for other
payments can be done very quick. Some problems banks[6]. This process helps to eliminate duplication,
related to the cryptocurrrency exchange to the local reduction of administrative effort and save time.
money can be happened because of changes in
exchange rates[6]. Table 2: Summary of functions (use cases) with the impact of
the blockchain
2. Digital verification: This can be done by removing all Function Blockchain impact Stakeholders
traditional verification systems like identity, face Authenticating Verifiable and Retail banking,
checking and proof of client intension by using Identity and Value robust identities, payment card
blockchain. Blockchain provides ways to choose user cryptographically networks,
can identify them and others who like to share their assured regulators
identity without repeating registration for each Moving Value – Transfer of value Retail banking,
banking services. Because of the shared ledger make a payment, in very large and Wholesale
system, any participant can access information transfer money, very small banking, Money
without permission. Therefore private information and purchase increments transfer services,
should not added to the blockchain. goods and services without payment card
intermediary will networks
3. Lending: Traditional banks provide different kind of dramatically
loans. But it take long time process. Blockchain can reduce cost and
use for this lending systems with superfast speed up the
transactions with transparent way. Banks are provide payment
loans, KYC (Know Your Customer) and BSA (Bank Storing Value – Payment Retail banking,
Secrecy Act) and link all of them to a single commodities, mechanism with a investment
consumer block[1]. This system helps to save money currencies and reliable and safe banking
and time for waiting the traditional long process. financial assets store of value
are stores of value reduces needs for
etc. financial services;
4. Bookkeeping, Accounting and Auditing: Most of the ban savings and
traditional banks still depend on paperwork like checking accounts
double entry transactions and after a long process will become
they are digitalized the details slowly. Banks can obsolete
directly enter their transaction details into the shared Lending value – Debt can be retail banking
ledger system [7]. All the records are transparent and credit card debt, traded, issued, and
irreversible when using blockchain. This system has municipal bonds, settled on the
a feature of smart contracts which can pay invoices corporate bonds, blockchain;
automatically. People who work in banks should government bonds, reduces friction,
have prior knowledge about blockchain is a mortgages, asset increases
considerable limitation. backed securities, efficiency,
improves systemic
5. Crowdfunding: This is an online raise funding errors. Customers
mechanism by involving large number of people with can use reputation
small amount of money. Initial Coin Offerings to access loans
(ICOs) have the ability to sell their tokens via Exchanging Value Increasing speed All the banks
internet, with the decentralization advantage by using dramatically
blockchain technology. This have a risk because of Investing and New models Investment
the legal issues in ICOs. Funding banking
Management Risk Lowering risk Wholesale bank
 IV. BLOCKCHAIN ON FINTECH AND CTYPTOCURRENCIES

B. Trade finance platforms in Blockchain A. Financial Technology ( FinTech)

Blockchain is widely expand in Europe, America and China FinTech describe large variety of emerging technologies and
banking industry. We.Trade was the first blockchain based innovative business models to transform financial services in
transaction and now there are many transaction platforms like an efficient way. Nowadays FinTech become an integral part
One Pay, Batavia, Marco Polo, Voltron, BBVA and Indra. of Banking and it started to compete with non-financial
institutes which provide services to consumers. Rapid increase
of FinTech changed the business model of banking by
providing innovative solutions. FinTech banks attract their
customers by providing financial services more efficient,
transparent, user friendly and automated than traditional
banks. Today FinTech includes Blockchain and
cryptocurrencies, Artificial Intelligence, Machine learning,
Digital advisory and training system, Mobile payment systems
and Crowd funding[16]. Among them this research will
discuss impact of Blockchain and Cryptocurrencies on
FinTech. It is hard to quantify the growth and the size of
FinTech in banking industry. As a result of the growth of
FinTech, it is a new wave of digital banking startups.
Figure 6: Trade Finance platforms in Blockchain
a) Benefits of FinTech in Banking
1. We.Trade: This was established in 2017 with nine There are many opportunities related to FinTech in banking
banks including Deutsche Bank, KBC, Nordea, Industry.
HSBC, Robobank, Natixis, UnitCredit and Societe 1. Offer better banking services- FinTech banks provide
Generale[12]. Purpose of this platform is to do strong financial services in cost effective and flexible way.
cross border transactions. This is realtime unique, 2. Greater Access to Capital- FinTech appears in Peer-
smart contract based platform which provides Know to Peer network by providing credits to users who
Your Customer interface. cannot get bank loans.
2. Batavia: This was developed by 5 banks including 3. Cost Advantage- This provide transactions and
Commerzbank, UBS, CaixaBank, BankofMontreal services in lower cost and fast. FinTech helps to
with the use of Blockchain technology[12]. This cutoff costs like cross-border transfers and make fast
provides securable transactions within small time payment methods.
period. Therefore Batavia eliminate invoice payments 4. Helps to increase financial stability.
and saved the time by using decentralized shared 5. Enhancement in Security-most of the banks use
ledger. Blockchain to enhance their transaction security
3. BBVA and Indra: This was the very first platform through the hash encryption and linkages between
which corporate loans. All the transactions have blocks[16]. FinTech helps to prevent these risks and
transparency with the combination of private and information leakage.
public blockchain. So they have the ability to trace
transaction details. b) Threats of FinTech in Banking
4. One Pay: This allows to do international transactions There are many variety of risks that can influenced in various
real time with different currencies. Customer can sectors as both strategic and tactical ways.
check whether they will receive the exact amount 1. Competition on market share- existing banks loss
before the transaction. These transactions fast and their market share and profit margin.
cost friendly. 2. High operational risk- use of FinTech for banking
5. Voltron: This is a finance trade platform based on industry increase the complexity of the systems and
blockchain to exchange credit. Voltron is an open limited expertise and experience in managing risks.
platform, anyone can join easily and exchange 3. Cyber risks- cloud computing, AI and other
documents to the network. This platform enables technologies facilitated to increase interconnectivity
financial industries and banks to give low cost faster potentially make more vulnerable to cyber-attacks
services to the customers. [16].
4. Risk of fraud or malpractice
5. Compliance risk regard to data privacy.
B. Blockchain on Cryptocurrencies applications offer solutions for that require significant changes
There are over one thousand cryptocurrencies in the world or complete replacement of existing systems in banking
among them Bitcoin is the best cryptocurrency which industry [11]. Despite its benefits and capabilities, the
blockchain technology invented. Cryptocurrency has been blockchain have some limitations too.
influence for people, busines and organizations. Blockchain
technology is the backbone of crypto invention. A. Limitations of blockchain technology
Cryptocurrency is a digital medium of exchange, create and
1. High initial cost: Blockchain save transaction cost
store electronically in the Blockchain. Encryption techniques
and time but it need high initial capital cost.
are used to control monetary units and to verify the transfer of
2. Complexity: This technology involves with entirely
funds in cryptocurrency [15]. Blocks in the Blockchain which
new vocabulary. Participants should have specialized
encrypted information stored in a ledger, on steroids are linked
knowledge about the technology.
using cryptography. Blockchain technology has decentralized
3. Network size: Blockchain requires a large network of
network which are interconnected nodes/participants which
participants. If it is not widely distributed grid of
are not rely on central server, and they are based on P2P
network, it becomes more difficult to achieve the
system.
benefits.
Crypto is the first application of Blockchain technology [17].
4. Transaction cost: Transaction cost of first few years
Mathematical concepts and consensus algorithms are
is free. But after that it rising transaction cost in the
combined with features of blockchain which create platform to
network.
regulate and transfer ownership can be identified without
5. Limited scalability and storage issues: Blockchain
central authority or third party [17]. Bitcoin and Etherum
have consensus mechanism to verify the transactions.
networks are based on Blockchain. Bitcoin revolutionized
This limits the number of transactions that can be
electronic currencies because of its simple characteristic,
made in a given time period. Blockchain has an
anyone cannot change values without fulfilling conditions.
immutable distributed chain of blocks grows at a very
There is a specific mechanism to rule these crypto. When
rapid space, then this can course for storage issues.
transaction approved, it cannot changed/deleted and it
6. Unavoidable security flaw: If more than half of
becomes immutable record in blockchain. Etherum is one of
participant nodes to service the network a lie, it will
the cryptocurrency which used to Smart Contracts in
become a truth.
Blockchain technology.
7. Energy and resource consumption: A blockchain
Figure 7 shows that how Blockchain and Bitcoin deals with
network consume heavy resources. When blockchain
investments from 2012-2016.
network grows, miners need to validate the blocks
also get increased. So it increased heavy energy
consumption.

B. Future improvements of blockchain technology

1. Blockchain and bitcoin are really hard to those who
are not worked with technology and software
development. So one of the future improvement is
build tools to make the transactions easier.
2. Storing data in the Blockchain is quite expensive so
make a solution for store the data off the chain and
send them to the blockchain periodically.
3. Make laws for adopt blockchain technology for the
industry is necessary for revolution of banking
industry.
4. Blockchain will hope to reduce their prices and
improve their quality of services with new features in
Figure 7: Relationship between number of deals and volume near future.
of interests using Blockchain and Bitcoin

VI. DISCUSSION
Today, Sri Lanka warmly welcome Blockchain technology
V. LIMITATIONS AND FUTURE IMPROVEMENTS
because of its massive collection of benefits. Central Bank of
In the above sections we discussed about blockchain Sri Lanka have appointed two committees to research about
architecture, how blockchain works, what are the algorithms potential suitability and practicality of blockchain and FinTech
we used, how we used blockchain for banking industry and in Sri Lanka in 2017. ICTA also recommend that blockchain is
how blockchain impact for the banking revolution. Blockchain a disruptive technology which provide security of data.
Therefore Sri Lankan government should seriously concern and financial institutes as well. Because both of them must
about this technology and make rules and regulations for adopt have confidence to use and involve with new technologies.
them. Most of the countries have experimenting this but Government should establish financial regulatory systems to
unfortunately still Sri Lanka taken ‘wait and watch’ approach. control blockchain based applications. Responsible authorities
Sampath Bank announced that they become the first bank to need regulators to govern abuse practices and legal
introduce and develop blockchain based banking solutions in prohibitions in applications based on blockchain. Still Sri
Sri Lanka. HSBC bank also announced that they successfully Lanka does not have regulation and taxation system to
executed first scalable trade finance transaction using overcome taxation of cryptocurrency. Therefore government
blockchain. should establish good taxation system, laws and acts to adopt
To adopt Blockchain in banking in srilanka, first bankers Blockchain technology in Sri Lanka.
should have prior knowledge about what is blockchain? ;
What are the advantages of blockchain among traditional
C. Comparison between consensus algorithms with banking
banking transactions? And how blockchain can adopt to their
services.
banks. Therefore now, there are some courses beginning
related to blockchain technology to teach about these things.
Most of the IT companies and Banks combine together and Below diagram shows a comparison between main four
doing meetups and discussions about this technology to adopt consensus algorithms.
it in Sri Lanka. Table 3 : Comparison between consensus algorithms

Consensus Security Network Resource Trans- Dece-

A. Challenges occur to adopt Blockchain in Sri Lanka Algor- Scale Consu- ition ntralization
Most of the protagonists think that blockchain revolutionized ithm mption Time
financial sector not only banking sector but also in other
sectors like healthcare, trade, law etc. However every new
technology takes long time to solve all challenges and use it as PoW High Large High Long Little
a powerful technology in world. There are some more High
challenges which occur when Blockchain adopt in Sri Lanka. PoS Little Large Medium Medi- Little
1. Financial Regulations: There are no any specific High um High
regulations or rules when it comes to the blockchain. DPoS General Large Low Short Low
Then no one has sure that they will be safe in using
blockchain transactions. Therefore Government and
PBFT General Small Low Short Low
other responsible sectors need to create rule related to
blockchain. There are no enough rules for banks to
adopt blockchain for their digital transactions.
2. Consumer Protection: There are no customer
protection systems in Sri Lanka to motivate When we discussed about blockchain revolution in banking
customers to use disruptive technologies in their day industry, we used blockchain for many banking services. In
to day lives. Therefore consumers are not tend to use this section I am going to emphasize which consensus
applications in blockchain. algorithms are more suitable for each banking services.
3. Taxation: There are many issues related to taxation of  Banks use blockchain for their payments specially
cryptocurrency in Sri Lanka. cross-border payments. Cross border payments are
faster and less expensive and need decentralized
ledger without intermediaries. Therefore PBFT is the
B. Solutions to overcome challenges for adopting blockchain best consensus algorithms because PBFT requires
in Sri Lanka low energy cost and decentralized ledger with low
Government, Central Bank of Sri Lanka and other responsible transaction time. POW, POS takes more transaction
parties should create the foundation of adopting disruptive time than PBFT.
technologies like Blockchain which is the next best revolution  Online transactions are impossible without identity
after the internet. Therefore they should do researches related verification. Blockchain create it possible securely
to blockchain and provide facilities to do research for banking reuse identity verification. In this case we need
sector to gain the technological knowledge. As an example consensus algorithm which provide more secure than
conduct trainings, meetups about the upcoming technologies others. Therefore POW is best for providing more
and their advantages using experts for each and every banks. secure with digital identity.
Government should give freedom to do experiments using  Banks use blockchain for syndicated lending, with
new technologies but responsible parties should track their more transparent. This helps to save cost and time by
improvements and performance time to time. Knowledge and reducing regulatory meetups. PBFT is more relevant
training is not enough to adopt a new technology. Government algorithm for syndicated lending. It requires small
should established rules and regulations to protect customers
 network scale, decentralized ledger with good blockchain technology. Blockchain should develop for small
transparent features. POW and POS can also use. scale networks as well in future. According to the consensus
 Blockchain technology used for crowdfunding in algorithm power consumption can be changed. Therefore we
banking industry. Crowdfunding involves raise funds should select best algorithm for relevant banking service.
by ask large number of people for a small amount of Developers should reduce unwanted security flows and make
money. Crowdfunding requires decentralization of simpler to use.
funding and more transparent. POW, POS and DPoS This paper gives a comprehensive review of blockchain
are more suitable for crowdfunding because of their revolution in banking industry. Blockchain is the next best
features. invention after the internet. Therefore my opinion is
 Banks used blockchain to smart contracts. These are blockchain is a great disruptive technology which
perform cryptographic transactions, transparency revolutionized banking sector better way in near future.
without intermediaries because of the decentralized
ledger in blockchain. If the cryptocurrency is Bitcoin
for smart contracts most of the time we use POW. If ACKNOWLEDGMENT
the cryptocurrency is Ethereum for smart contracts This is a great opportunity for me to convey my heartiest
most of the time we use POS because of their thank to Dr. Shalinda Adikari, Department of information
features. technology, University of Moratuwa who was always behind
 An Ethereum blockchain uses POW algorithm for the success of this paper from the points I choose the topic for
KYC in banking industry. POW helps to the study. I extend my sincere thanks to Dr. Lochandaka
independent verification of each customer of one Ranathunga and Mr.Piyumal Ranawaka for helping to
bank, help to eliminate duplication and save time complete this report successfully.
rather than other algorithms. My sincere thanks is also extended to the Faculty of
Information technology, University of Moratuwa for granting
regarding to the independent study.
VII. CONCLUSION
Blockchain is decentralized digital ledger which cannot
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