Tuesday, 25 August 2015

Banks and Exchanges Turn to Blockchain

The Blockchain — the technology that underpins bitcoin — has been called “the future for financial services infrastructure”. Now banks, clearing houses and exchanges are becoming increasingly excited at the prospect of blockchain fundamentally transforming their business models.
Banks and exchanges see a ledger updated in minutes as saving millions in collateral and settlement costs to third parties.
“Blockchain technology continues to redefine not only how the exchange sector operates, but the global financial economy as a whole,” says Bob Greifeld, chief executive of Nasdaq.

Comment:
The Blockchain and its derivative technologies are one of the biggest opportunities in the last 30 years to re-engineer banks and financial services. The key question is whether the banks will fail to reinvent themselves as they did with the Internet, or if they will dare to induce a self-inflicted shake-up and embrace a "Blockchain Banking" technological future with significantly lower costs, less friction and faster settlement and clearing times. 

FT Explainer: 

At present, when one bank sends money to another, no physical currency changes hands. Banks and settlement systems use central electronic ledgers to track assets. But they can be slow and inefficient, often relying on faxes or manual input. That not only wastes time but racks up fees. The system is also open to hacking and fraud.

Proponents say a ledger updated in minutes could savemillions in collateral and settlement costs, while also automating banks’ creaky and expensive back office systems. Collateral could also be moved around the system faster, to meet new rules on derivatives markets implemented after the financial crisis.

Full article here:
The blockchain and financial markets 

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Interview with Gideon Greenspan
"Crucially, banks want permissioned ledgers so they can say who can connect to the network, who can send, who can receive and who can confirm transactions."
"While the bitcoin network expends vast amounts of collected computation power to prevent a 51% attack, private blockchains can employ simple but effective security enhancing techniques such as forced rotation mining patterns.
Greenspan explained: "If there are ten permitted miners (Ed: ie. validators) we could insist that at least eight of them mine in rotation."

Full article from IB Times:

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