“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10. Don’t let yourself be lulled into inaction” – Bill Gates
Blockchain-based cryptocurrencies, like Bitcoin, remained hidden on the dark web and for those technologists in the know. Those early pioneers who purchased bitcoin in the early years (2009-2011) for a single cent or more were as brave as the earlier American frontiersmen of a former age. The bitcoin boom has now entered the mainstream. This is because big money has and is being made from the blockchain encryption-based technology. When large organisations, especially large financial organisations, are talking about digital currencies, you know blockchain-technologies like Bitcoin have started to disrupt normative market behaviours.
The New Kid On the Block?
When big financial institutions write about something new, you know that something has disrupted the flow of ‘business as usual’ in the marketplace. Bitcoin is one such disruptor. The blockchain technology has created wealth from digital obscurity and big and established business are starting to take note. Deloitte, the large financial services giant, argues “Although we are not going to see a blockchain technology causing a paradigm shift in the near term, we are most definitely seeing a voracious interest in the underlying technology and its cross industry potential use cases.”
The Saint of Wall Street
What the subtle folk at Deloitte are insinuating is that whilst Bitcoin has a role to play, the future of banking is about a more standardised, better regulated framework that larger, wealthier, institutions can deploy and execute with increased levels of trust. According to Martin Wolf, of the Financial Times, cryptocurrencies and the underlying technology behind them could change the ethical framework of banking and finance. He argues that blockchain technologies could create instant settlement of accounts – as opposed to the current system that can see transfers take days – based on distributed ledgers in a real-time setting (like Bitcoin). This would see the shared key and collaboration between account holders reduce unethical financial crimes.
The Big Bang Version 2.0
Another dynamic of possible massive disruption surrounds the fallout of the 2008 banking crisis. The Bitcoin revolution could lead to a new banking system based on a simpler peer-to-peer platform. Instead of focussed platforms, like banks, the Bitcoin technology could lead to a more cooperative indirect format of banking based on needs being met by a global market of users. This would result in a broadening of banking possibilities which would result in the big banks losing their monopoly on payments transfers and deposit holding account.
However, before we conclude that Bitcoin will lead to a utopia of financial services. Big banks are investing heavily into blockchain technologies, and for good reason. In December 2016, one Bitcoin is worth $764.68 US dollars. This doesn’t necessarily threaten the banks, but like all new technology, they want to be involved in its development to protect their business interests.
Taking Care Of Business
Morgan Stanley argues this point further, “The code underlying Bitcoin was supposed to spell the end of traditional finance; instead, big banks plan to leverage it to streamline operations and costs, while improving services and products for clients.” The banks are trying to use blockchain to ‘hack’ their own business models in order to create better alternative solutions for their client needs.
What this article has highlighted is the duopoly of ideas and competing ideals surrounding blockchain technologies, like Bitcoin, that finds smaller, more agile, organisations viewing Bitcoin as a way of ending big finance’s grip on the world economy. The banking giants are seeing blockchain technologies as ways of streamlining their businesses. Whatever the outcome, blockchain cryptocurrency disruption of the financial sector has only just started – keep watching as change is coming soon to a bank near you!
Article supplied by Wirex