Banking on the Blockchain

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Banking on the Blockchain

Bitcoin remains a controversial topic for many, but most people we talk to see real promise in the blockchain. That is shorthand for the computer-based public ledger of transactions that underpins almost every crypto currency. In theory, many industries could substantially reduce their IT budgets and increase efficiency by using blockchain technology instead of their own proprietary or walled-garden third party systems.

The global financial services sector is one such logical early-adopter of blockchain technology. First, it already spends heavily on Tech; our friends at Celent put global banking IT budgets at $261 billion this year. Second, the blockchain offers two things the industry needs: security and efficiency. At first glance, it looks like a slam-dunk.

But doesn’t bitcoin get hacked all the time, you might ask? The actual truth of the matter is that bitcoin’s core system – the blockchain – has never been hacked. Exchanges and wallets, yes… But in over 9 years of operation, bitcoin itself has remained secure. Thousands of miners keep the ledgers, each “block” cycling between unrelated parties running the same code to authenticate transactions to keep the system honest. That is the elegant genius of the blockchain.

So how is the global banking system leveraging blockchain technology? The cute but realistic answer is “Slowly, for the most part”. Still, here are some recent examples:

If all this seems a little bewildering, think of the history of the ATM as an analog. The original adoption there was in Europe, as a response to rising bank branch labor costs during the 1960s and 1970s. It caught on in the US in the 1980s as the technology improved and customers grew accustomed to 24/7 banking services. Now, they are ubiquitous.

And so it will likely be with blockchain technology, starting with cost savings as the primary selling point and eventually morphing into value-added service.

Source for ATM history (and a pretty cool read):