December 6, 2016
There’s been a lot of noise recently about bitcoin, blockchain, and cryptocurrency. Some of it is hype, but some of it points to important forces in the financial services industry. So what does it all mean?
Blockchain also has potential applications far beyond bitcoin and cryptocurrency. Blockchain is, quite simply, a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The major innovation is that the technology allows market participants to transfer assets across the Internet without the need for a centralized third party.
From a business perspective, it’s helpful to think of blockchain technology as a type of next-generation business process improvement software. Collaborative technology, such as blockchain, promises the ability to improve the business processes that occur between companies, radically lowering the “cost of trust.” For this reason, it may offer significantly higher returns for each investment dollar spent than most traditional internal investments.
Financial institutions are exploring how they could also use blockchain technology to upend everything from clearing and settlement to insurance.
When a technology moves so quickly, it’s dangerous to sit on the sidelines. We’re watching blockchain move from a startup idea to an established technology in a tiny fraction of the time it took for the Internet or even the PC to be accepted as a standard tool. Blockchain technology could result in a radically different competitive future for the financial services industry.