So what is blockchain?
Blockchain is set to disrupt the financial industry…..
|Some of the banks exploring blockchain|
SO what is “BLOCKCHAIN?”
Instead of one central database of who owns what, blockchain allows for a network of identical, linked databases that talk to each other and are updated simultaneously. Simon Taylor, VP Blockchain R+D at Barclays, said blockchain is best viewed as a reconciliation technology, rather than a payment technology.Below is a great video on how Bitcoin (the first application of Blockchain works
The World Economic Forum (WEF) has concluded that blockchain technology “will fundamentally alter the way financial institutions do business around the world” after a year-long study of the emerging technology.
“It represents a fundamental threat which could disrupt almost every process in financial services” says Bank of New York Mellon head of EMEA Innovation Centre.
“Banking processes in place for 100 years-plus will be massively disrupted,” UBS’s Bussmann said
“Twenty-five global banks, including the Commonwealth Bank of Australia and National Australia Bank, are now working together through the R3 distributed ledger initiative, which is developing a framework for using blockchain technology in markets”
Blockchain technology could potentially underpin a global market infrastructure, built on an open protocol, for money and financial assets.
Blockchain can drive simplicity and efficiency in financial services and will redraw processes and disrupt orthodoxies that are foundational to today’s business models.
Blockchain will become the beating heart of the finance industry. “It will build innovative solutions across the industry, becoming ever more integrated into the structure of financial services, as mainframes, messaging services, and electronic trading did before it.”
To make a change or add onto the blockchain the majority of members of the network must sign off on it. This cuts out the need for middle men in transactions, because the fact that everyone signs off means trust is built into the system.
By cutting out middle men, cost is reduced. The process also reduces error.
The technology could be used to record anything that involves transactions. Applications are being developed for everything from share records to art and diamonds.
Banks and financial institutions have been going crazy for blockchain technology over the last year and a half. Institutions are spending heavily on proof of concepts using the technology, issuing countless white papers, and joining industry-wide bodies to figure out how to use the protocol.
WEF says 80% of banks will start blockchain projects by 2017 and $1.4 billion has been invested into the technology over the past three years. 90 central banks are looking at the technology.
WEF identifies six “key value drivers”, which are basically reasons why everyone is so enthusiastic about it. They are:
- operational simplification,
- regulatory efficiency improvement,
- counterparty risk reduction, near real-time settlement.
- clearing and settlement time reduction,
- liquidity and capital improvement and
- fraud minimization. and
- lower direct transaction costs