Upon its inception in 2008, the Blockchain platform was designed to create an alternative cryptocurrency known as Bitcoin. As a matter of fact, they truly created cryptocurrency. It is no secret now what Blockchain is or what Bitcoin is planning to do with the technology. Right off the bat the technology was praised for its triple count record-keeping accounting.
The platform, and more importantly Bitcoin, check the transaction on 3 separate sides to qualify the transaction and clarify who is involved. The platform has received criticism from the get-go and continues to fall under scrutiny from people who truly don’t trust it or don’t understand it. We must, however, dig deep into the technology to observe and examine what it can potentially do for our current Industries. Essentially, a Blockchain is a group of data separated in to blocks that are created and mined via mathematical proofs.
As a means of necessity it is constantly updated and interacted with by a large community of programmers. The recent spikes and its valuations have made many people very rich. The potential of new Bitcoin futures could replace gold futures as the new value stocks. This sudden rise in value over the past three years has taken the financial industry by storm and the larger news outlets have been caught off guard by the recent take off of Bitcoin.
It is not surprising then that Bitcoin’s popularity has skyrocketed. Ever since the rise of cryptocurrency, financial industry leaders have taken note and are beginning to implement the technology. The most fascinating aspect of this is how they are going to incorporate it into their natural functions and how it will affect the financial industry for us all.
The most useful aspect of the Blockchain is it’s transparent and clear accounting surface. Due to the transparent nature of the Blockchain it has the ability to keep those who exchange goods or currency honest. As a result, accounting is more trustworthy and much more accurate. It is no wonder then that the financial industry is beginning to use Blockchain software so widely. A little-known fact about the financial industry is that banks typically spend over 2 billion dollars a year on record keeping.
The Blockchain technology would essentially eliminate this cost which in turn would add to the total value of a bank. Individuals all over the world have seen the benefits for personal use. The software allows them to transact goods and direct currencies with clear and accurate accounting.
Another use of the Blockchain technology is third-party observation which allows for planned and watchdog transaction histories. We are then not surprised that the Blockchain platform has become so popular.
For years before it’s inception, the financial industry ran amok with bad actors and fraudulent activity. The Blockchain platform could, in time, completely revolutionize the way that banks transact monies and keep records. What is important to note is that this technology, while new, has been tested many times over and is still being improved. These changes will not take place overnight, but, will be coming soon. The Blockchain platform has also allowed individual banks to create their own cryptocurrencies.
This probably has the biggest impact across the board in the financial sector. Businesses like JPMorgan Chase and Wells Fargo are investing heavily in the alternative currency source as it is seen as a more secure method of purchasing and transacting. Anything that can help in the clarity of business is always welcome in the financial industry.
The banks that create their own cryptocurrencies hope to spread them and allow for competing currencies that can have different values and can be used to purchase different things. This would create a highly personalized economy for each individual that would grant the customer greater freedom and give them a sense of security in the reliable accounting ability of the Blockchain platform. Senseless valuations that are meant to only burn cash are never a good idea. Like we have seen recently, the Bitcoin bubble, as it were, is not indicative of what the technology is used for.
Essentially, Blockchain, and Bitcoin, are technologies that can revolutionize finances for individuals and businesses. It’s introduction into the financial industry will not only revolutionize the way banks do business but also how outside observers interact with the larger economy. Ultimately, Blockchain is the freedom for individuals to stay educated and free so that we may never feel like the underdog again.
by Paul Sciglar, CFA
