Blockchain is a relatively unknown type of consensus-based computing that has the potential to lead a tech-powered and societal revolution. Since the dot-com bubble, the way information is exchanged has progressed massively. Change is both exciting and worrying due to the fear of the unknown. Cyber crime is a serious issue and a worry for every individual and group who share their personal data through the fascinating medium that is the internet. Blockchain is revolutionary by nature as it is the first native digital medium for peer-to-peer value exchange and it uses cryptographic technology. Bitcoin is a currency behind the technology of blockchain that has had astronomical success especially in recent times of currency uncertainty due to factors such as Brexit.
One Trusting Many
Blockchain offers individuals who do not know or trust each other the opportunity to create a record of who owns what and the impact on everyone concerned. In essence, it is a way of making and preserving truths. A blockchain is built on shared ledgers where participants write transactions in near real-time to a permanent record of the asset or transaction. The game-changer is that the chain is unbreakable and has the ability to protect any type of sensitive software and remove concerns of data theft.
This could be significant for industries dealing with highly sensitive data such as finance, governments, and defence. The only individuals or groups who can view the data are those involved in the transaction. Paul Brody, Strategy Leader with EY Americas, argues that “blockchain shifts cyber security from depending on one to depending on many” with the significance of this being that a large volume of people is much more trustworthy than any one individual. It could significantly decrease the risk of error and the time spent on error checking.
A Solution For Tech Giants
Blockchain poses many benefits to technology firms who try to implement their applications to highly sensitive industries concerned about their data being infiltrated by cyber criminals. Providers such as SAP, Microsoft and Oracle are currently working on a massive shift from on-premise applications to cloud-based solutions. For industries such as banking, the idea of the cloud is risky. Blockchain may alleviate the stress while saving billions of dollars and reducing transaction completion time.
Pioneering blockchain in finance could yield benefits like slashing costs and helping with the streamlining process now evident in global banking. For example, Santander produced a white paper that estimated more than $20bn a year could be saved in clearing and settlement alone. Under the appropriate guidance, blockchain can revolutionise trading and transactions. This means that technology could make elements of banking protocol, and revenue channels could become obsolete.
The Investors Are Coming
The backing of such potential is evident as research by market analysts Juniper Research noted that venture capital investment in blockchain and Bitcoin companies totalled $290m in the initial six months of 2016. Three firms generated significantly more than a third of all investment: Circle, Blockstream, and Digital Asset Holdings.
This begs the question: why has no one thought to jump on this next technology revolution to maximise the potential before recently? The reality is that blockchain, although a buzzword and hyped for some time, is still relatively a blur to the masses. It is more than a technological change, as Chris Skinner, CEO of Finanser.com, said: it is also a business protocol change. Competition is high in the technology industry, in banking too, and if one can fully understand the significance and potential revenue gains from blockchain they can excel themselves in the future and potentially have a stronger influence over rivals.
Much of the problem with blockchain is that the people who make the final decision on its implementation are not tech-savvy to the extent to understand the full ramifications of its application. As evident for tech firms when trying to sell their products, the customers who make the final decision are interested in what value blockchain can add, without much appreciation for the technology itself. To reach the decision-makers in a firm, they must get through the technical side who lack the business motive. In the banking world, for instance, the idea of blockchain is starting to become sour, and the buzz may soon go.
Blockchain Is Still A Mistery
Moreover, the discussions on blockchain are becoming diffracted and lack a deep understanding. In reality, the main empathise is that blockchain is an agreed shared ledger. Therefore, it requires more than one participant. This could be beneficial internally for a shared database of employee records which could change the set-up of large MNC, or what is more interesting is the external applications which could have a global impact such as trading. It could also mean the loss of human capital in areas such as business operations and a switch to computing-based solutions.
One may find it ironic how blockchain went from undermining the finance world and how it is run to now being the solution. The irony comes from the fact that blockchain gained awareness from bitcoin with many of its supporters claiming crypto-currency will eventually defeat the global banking system. In reality, will banks move towards worry-free instant transactions, as they are currently making high turnover on financial transactions, and if they were to change, why would people bother to pay banks to facilitate them if it is easy? New players could offer existing services at lower prices. The ex-head of Barclays Technology argues that the banking sectors’ motive for blockchain is cynical: to exert control, not to drive meaningful reforms.
The Possibility Of A Revolution
Ultimately, blockchain has the potential to reset the clock on the science of organisational management, the tightening of trust and the economics of wealth creation. As a result, blockchains will enable profound economic progress enjoyed and driven by a greater number of individuals and organisations. As Skinner highlights, there are four leading lights in blockchain developments for banking: R3, Digital Asset Holdings, Life.Sreda and Swift. Life.Sreda is a venture capital fund in Singapore that announced a $100m venture capital fund in April that will invest exclusively in blockchain start-up companies relevant to banking. Swift is the largest shared network and standards organisation in banking, hence playing a key role in blockchain which is only relevant if shared.
Critically, blockchain it is moving in the right direction but for such a great prospect why is it not pushed faster and why has it not been done previously? A report from Forrester argues that blockchain becoming mainstream will have a three-phase trajectory over the next ten years. But in reality, it is much more straightforward than many would have you believe and the key to going forward is the success of relaying that message to potential users which could mean greater revenue for tech firms and efficiency gains for sectors like finance.
Blockchain is diverse, with uses from identification to asset management – the potential is unlimited. The problem with implementing blockchain is that interrupting the old large infrastructure debt in financial processing systems for even a short time could be catastrophic, and in a period of banking uncertainty can that risk be run?
Trying to inspire possible blockchain users about the potential will be the biggest hurdle. But in light of recent times with the grow of fintech, the next half of the year will be significant as it will become apparent how much of a priority blockchain is to the financial sector and its impact.