Blockchain is a technology that allows information and assets to be recorded and moved digitally. It became widely known because of its role in cryptocurrencies, but its applications go far beyond them.
Today, the technology can also be used for payments, international transfers, transaction settlement, stablecoins, and asset tokenization.
To understand its impact, imagine a money transfer between two countries. Normally, the funds may pass through banks, payment systems, and foreign exchange services before reaching their destination. Each step needs to exchange information with the others.
Blockchain offers another way to organize part of this process. It allows a network to record and share transaction information according to predefined rules.
In this article, you will learn how this technology works, where it can be used in the financial market, and what it means for companies and financial institutions.
What is blockchain?
Blockchain can be understood as a shared digital record.
When a transaction takes place, its information is recorded in this system. Instead of a single company controlling the entire record, the data can be stored and validated by a network of participants.
A simple way to imagine this is to think of a shared spreadsheet. Several people can access the information, and for a new transaction to be added, it must follow the rules established for that network.
Blockchain uses specific mechanisms to protect and validate these records. This makes it possible to track the movement of digital assets without relying on a single centralized system.
Why does blockchain matter to the financial market?
A large part of the financial system operates through different systems that need to communicate with one another.
Imagine that a company wants to send money to another country. Depending on the transaction, it may need:
Bank → foreign exchange → payment system → settlement → receiving bank
Each step can involve a different institution. Blockchain can create new ways to connect these stages. In some cases, a network can be used to transfer, record, or settle an asset, reducing the number of systems involved in that part of the transaction.
This does not mean blockchain will replace banks and traditional financial systems. In many cases, it can work alongside them.
Blockchain and stablecoins
One of the best-known examples of this combination is stablecoins.
Stablecoins are digital assets designed to track the value of a currency or another reference asset. BRZ, for example, tracks the Brazilian real. USDC and USDT track the US dollar.
Because they are digital assets, stablecoins can be transferred on blockchain networks.
This creates an interesting possibility for financial transactions: a company can use traditional currency at one stage and a stablecoin at another.
For example:
BRL → conversion → stablecoin → settlement → USD
In this case, the Brazilian real can be used at the beginning of the transaction, the stablecoin can be used at an intermediate stage, and the US dollar can be used for the final payment.
The technology therefore does not need to be used throughout the entire process. It can be applied only where it makes sense.
International payments
Cross-border payments are one area that can be affected by blockchain.
A traditional international transfer can involve different banks, currencies, and payment systems. This can make the process more complex, especially when there are several steps between the payment and the final receipt.
In some cases, blockchain can be used to transfer a digital asset between participants.
For example, a company could:
Receive Brazilian reais in Brazil;
Convert the funds;
Use a stablecoin at one stage of the transaction;
Convert the amount into the currency of the destination country;
Make the local payment.
The path used depends on the transaction. Blockchain is simply one of the tools that can be used to connect these different stages.
Transaction settlement
Settlement is the point at which a financial transaction is effectively completed.
Imagine that two companies are trading an asset. One needs to deliver the money, while the other needs to deliver the asset. In traditional systems, this information may pass through different systems before the transaction is completed.
When an asset is recorded on a blockchain, its movement can be recorded directly on the network.
This can make the transaction easier to track and reduce the need to compare information across different systems.
For transactions involving many participants, this feature can help make some processes simpler and more automated.
Asset tokenization
Blockchain also makes it possible to create digital representations of assets. This process is known as tokenization.
Depending on how it is structured, a token can represent a financial asset, an economic right, or another type of value.
For example, an asset that exists outside the blockchain can have a digital representation recorded on a network.
This can simplify certain processes, such as:
issuance;
transfer;
trading;
recordkeeping;
settlement.
Tokenization creates new possibilities for companies and institutions to develop digital financial products.
Smart contracts: rules that can run automatically
Another important concept is smart contracts.
Despite the name, they are not traditional contracts. They are programs that run on a blockchain and perform specific actions when the conditions defined in the code are met.
Imagine a rule such as:
“When the payment is confirmed, transfer the asset.”
In an appropriate application, this action can be performed automatically by the program.
In financial markets, smart contracts can be used to:
settle transactions;
distribute assets;
move funds under specific conditions;
execute financial rules;
connect different applications.
This can reduce some manual tasks, but it does not eliminate the need for security, oversight, and controls.
Blockchain and the traditional financial system can work together
It is important to understand that blockchain does not necessarily mean abandoning the financial systems that already exist. In fact, many transactions can combine both environments.
A company can use:
banks to hold and move traditional currencies;
local payment systems to receive or send money;
foreign exchange to convert currencies;
blockchain to move digital assets;
stablecoins at specific stages.
For example:
BRL → bank → conversion → stablecoin → blockchain → conversion → USD → local payment
Each component has a different role. Blockchain is used at a specific stage, while traditional systems continue to support the other parts of the transaction.
What does blockchain change for companies?
The main change is the emergence of new ways to move and represent value.
Companies can use these technologies to create products, connect markets, and develop new types of financial transactions.
Some possibilities include:
international payments;
stablecoin transactions;
asset tokenization;
new settlement models;
digital financial products;
process automation.
Financial institutions can also use these technologies to modernize existing processes or create new services.
However, adopting blockchain does not automatically make an operation better. Companies need to evaluate whether the technology actually solves a problem and how it can be integrated with the systems they already use.
Blockchain and the future of the financial market
Blockchain is creating new ways to record, move, and represent value.
Stablecoins, international payments, asset tokenization, and smart contracts are some examples of how this technology can be applied.
This does not mean that banks, traditional currencies, and payment systems will disappear. The more likely scenario is that different technologies will work together, with each one performing the functions for which it is best suited.
For companies, the challenge will be to understand where blockchain can actually create value and how to connect it to the systems already supporting their operations.
Want to understand how blockchain, stablecoins, and financial infrastructure can work together? Talk to the Transfero team and discover how to connect different financial rails to your operation.
