How blockchain technology can change the world
Banks were supposed to be afraid of Bitcoins, now the technology behind them might change the banking system.
Last year MIT business professor Trond Undheim said “banks are afraid of Bitcoin because it would force them to innovate.” But instead of fearing Bitcoin, it seems like banks are innovating instead. They’re looking at the technology behind cryptocurrency, called blockchain, and seem to like what they’re seeing.
“The concept is a network that guarantees the validity of a transaction,” comments John Jason, a lawyer at Norton Rose Fulbright Canada LLP, in the Financial Post.
According to him, Bitcoin merely served as “proof” of that concept. Now, it’s recognized that anything that plays a “trusted intermediary role” in today’s world “could be replaced by blockchain technology.”
“There is no central authority in Bitcoin. No government runs the currency, no bank oversees it, there’s not even a central processing center. Everything is decentralized and the community runs itself,” Digital Journal writes.
Bitcoin doesn’t need a government or a centralised banking system, because it has blockchains.
This is how the system works, as explained by Digital Journal.
“The blockchain encourages bitcoin users and companies to process the vast amout of data required to track all bitcoin transactions and the location of all bitcoins ever created. In exchange, the so-called miners who use their processing data are rewarded with the creation of new bitcoins and also processing fees. The result is an autonomous, decentralized processing system capable of sustaining an entire currency.”
Several companies are now looking into how Bitcoin’s blockchain technology could be used to process data. The NASDAQ is looking into how to use blockchain tech to enable stock and asset trading.
In July Business Insider suggested that blockchain technology could change the way financial markets operate.
“Everything from stock to bonds and derivatives could be exchanged and paid for in the same way the cryptocurrency community is executing bitcoin transactions,” Blythe Master, the chief executive of Digital Asset Holdings says in the article.
Masters compared where Bitcoin and cryptocurrency are now in terms of their development to early 1990s Internet.
Finance insiders aren’t they only ones interested in blockchain technology. Some politicians are also showing an interest in cryptocurrency.
In August Blockchain CEO Peter Smith was one of 31 executives to participate in a trade delegation led by the British prime minister David Cameron to promote FinTech businesses in Southeast Asia.
US congressman Jared Polis has argued passionately for Bitcoin. When policymakers in the States suggested that Bitcoin should be banned, Polis argued that it was the US dollar that should be banned – not Bitcoin.
Libertarian Rand Paul, one of the candidates in the 2016 Republican presidential race, is accepting Bitcoin donations to his campaign. The Washington Post called it a “genius political move“.
“There’s a longer-term strategic play, here, one that speaks to Paul’s appeal among tech-focused libertarians in Silicon Valley and young people who are eager early adopters of new services,” the paper writes, adding that “Transactions by Bitcoin will probably cost his campaign far less in merchant fees, increasing his revenue slightly on every Bitcoin transaction. Over hundreds or even thousands of donations, those savings could add up.”
What is blockchain technology?
Here is what Wikipedia has to say.
A block chain is a distributed database that maintains a continuously growing list of data records that are hardened against tampering and revision, even by operators of the data store’s nodes. The most widely known application of a block chain is the public ledger of transactions for cryptocurrencies, such as bitcoin. This record is enforced cryptographically and hosted on machines running the software. The technology forms the basis of all cryptocurrencies.
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Image by Luis Llerena.