The keys to finally understand the importance of blockchain
Is blockchain really the philosopher’s stone that will transform the fintech world? In order to answer this question, financial sector experts met in the last edition of Revolution Banking 2016 This article outlines the key lessons of the discussion that took place and which can help to better understand why blockchain technology is in vogue and its role in the future.
-Experts believe that blockchain can irreversibly transform not only the financial world but also many different fields: energy companies, telecommunications, public administration, logistics, transportation, media, etc. An example of these applications is the start-up which won Open Talent 2015, Everledger, dedicated to the detection of fraud in the diamond market by tracing the ownership of the gemstone in a decentralised manner.
-Blockchain can also help determine whether an individual or company is who they claim to be without having to share or to run externally any personal data. This “proof of identity“, would allow, for example, to rent an apartment directly in Airbnb or a car-sharing vehicle using a system based on blockchain as “validator of the proof of identity” without the need for any renting intermediary company to be involved or any data to be transferred at any time.
-Regarding the interest that the chain of blocks generates in the financial sector, it is worth noting that banks generally are not interested in bitcoin as currency, but on the underlying technology; the origin of the movement that has placed blockchain as the perfect technology for decentralised distribution. Blockchain enables secure and inviolable financial transactions of data or of any other kind, in a completely reliable manner and without the need of an “intermediary” entity. Bitcoin was the first protocol, but others like Ripple or Ethereum have drawn the attention on financial innovators in recent months. The ultimate reason behind this challenge is the fact that the role of essential intermediary of banks in certain transactions, such as financial transfers between individuals, sale of financial assets, financial or personal loans, may be impacted by the implementation of blockchain and could possibly force banks to adopt a new role in this emerging decentralised economy. Thus, crowd products and services, collaborative economy, interpersonal loans, P2P payments and transactions are becoming increasingly common. Blockchain will further accelerate change when it is ripe enough and it has shown that the expectation generated was well-deserved. Meanwhile, we are barely witnessing all the possibilities it will offer in the coming years. For example, BBVA is already working on this kind of “identity validators”, without blockchain for the moment, by offering through its APIMarket a BBVA Connect service that allows the customer to “proof his/her identity” to third parties without having to share personal data at any time.
-For the purposes of a global supervisor, this technology allows them to control all transactions from a single source in a transparent and centralised manner.
-Another relevant aspect of blockchain is the possibility of using it to create smart-contracts between individuals, entities and even machines. In this specific area, usability needs to be improved and the process simplified so that it may expand commercially as a key tool to develop reliable digital contracts without the need for a traditional central “verifier” such as a notary public, a registrar, or any official.
-Although there are large investments and hopes for the development and growth of products and platforms based on blockchain, experts believe it will take around 2 to 5 years, maybe even 10, for commercial products based on this technology to be available in the market. Indeed, the scalability of blockchain, the ability of this technology to support millions of transactions almost simultaneously, offering maximum performance and speed, is one of the major issues to be resolved in the coming months. The truth is that this technology will be greatly improved in the short and medium term.
The obvious conclusion is that there is still some way to go to strengthen the technology and discovering new applications thereof, although this way implies a major change in the technological and financial paradigm, full of opportunities for technological innovation for both the banking industry and the industry itself at large.
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