Blockchain is a game-changing technology that has various applications. It all started with digital money, particularly Bitcoin, but the demand for its benefits went beyond crypto money. As a distributed database system, many industries wanted to capitalize this unique technology, which is why blockchain has accumulated an extended list of use cases.
The pension market, more than any other, would need the support of a distributed ledger, and blockchain is like fresh air. The blockchain is a few years away from bringing significant changes in the retirement industry and revolutionize the whole concept of how the pension and insurance operations run.
The massive shift potential of blockchain is meant without exaggeration – it can really upgrade the pension industry to a new level, where transactions are transparent while the activities and funds are easy to track and manage.
Four Key Aspects to Be Transformed After the Implementation of Blockchain
To be straightforward, let us analyze what the key elements that could be transformed with the help of blockchain are:
- Security – security is one of the main factors since the pension market operates with funds and it tries to solve existential problems orchestrated in a fixed manner that considers the time. The retirement industry is always focused on the future, and people want to feel secure about it. Since blockchain technology applies cryptography, it can offer the market participants a feeling of safety. The beneficiaries of a retirement plan won’t be reluctant to provide their personal data and funds to a service that applies a highly secure ledger based on blockchain system. Even if public, the database may be maintained under the powerful lock of cryptography. Whether it is a government or a private pension fund, it can denounce fraud at the very inceptive level if correctly applied.
- Transparency – the great advantage of the blockchain technology is that despite the total security approach, it does not affect transparency, which is so important in this industry. Let’s be honest – corruption is a routine in any country in the world, even if at different levels. It affects the industries with huge capital flows, and the pension market is massive. Think about the fact that there is over $20 trillion held in pension funds worldwide according to Morgan Stanley. The retirement industry holds more than mutual funds, hedge funds, and insurance companies.
It is clear that this is a point of attraction for frauds and large and sophisticated networks of corrupt organizations. Some structures are so complex that they can mitigate the law and regulation effect and still attack pension funds directly or subtly. They can do it from the inside or the outside. In an attempt to avoid any of these critical problems, the blockchain technology proposes a secure database that is available to all the entities involved, at any time, and from any place. It is like a dream come true for pension fund contributors. The reality today is that some government or private pension funds can reduce the involvement potential of contributors for the sake of security, while the latter do not always fully trust the funds for their secretive manner of action, suspecting or at least worrying about frauds. However, blockchain technology can conciliate all the parts by providing the grounds for a transparent database while maintaining a high-security degree. This level of transparency can counteract the corruption phenomenon. The information can safely circulate in and out without being affected. Individuals, regulators, and managers can track the pension funds at different levels and check the compliance to all the requirements and stipulations.
- Convenience and lower costs – a blockchain infrastructure can simplify every aspect of a pension fund activity, reducing the need for central authorities and for all the intermediaries that are typically entrusted with different functions of control or management. Considering the weak nature of the human factor, these intermediaries are often incapable of mitigating frauds and errors while they keep the costs high anyway. The blockchain system does not have any hidden and variable interest guided by a volitional or emotive state since it is simply a technology – you can forget about human errors and poor governance practices. Moreover, every essential process can be automated. Since this kind of infrastructure can do well without intermediaries, it can reduce costs, and the surplus can be invested in various internal projects.
- Immutability – the pension market is very sensitive when it comes to contracts and stipulations because it is focused on the future, and stability is crucial in this case. Blockchain technology, especially Ethereum based one, can offer immutability and stability over an undefined period due to its great features possible with the smart contracts. No tampering and further changes can be made once the contract conditions are triggered. All the parts involved will get the predetermined results – no more and no less. All the transactions are accurate and processed with high precision, in accordance with the stipulated conditions that were initially agreed on.
The mentioned benefits are only a few aspects of what the blockchain technology can do in relation to the pension market. The results will be so big that the current approach will be gradually ignored in favor of a blockchain-based infrastructure.
The Voice of Auctus in This Revolution
We at Auctus, an innovative service aiming to bring blockchain benefits to pension funds, have a visionary team that could predict the major impact of this new technology. Since the pension industry is obliged to deal with huge volumes of transactions and data, blockchain comes at the right moment to support management of funds and information.
We bet on Ethereum-based blockchain that operates with smart contracts. These contracts omit third parties and help the funds automatically trigger the predetermined conditions at a predetermined time. This is essential for retirement plans, which operate with many time-related dispositions.
We are proud to be at the heart of these technological shifts of great importance, and we hope to demonstrate the full capacity of the blockchain functionality at the practical level.