Until recently, Blockchain was a term only known to geeks and specialists. But in the last six months it has become a buzzword.
In very simple terms Blockchain is the act of recording events in a database. The database itself is referred to as the Blockchain. Once data is added to the Blockchain, it cannot be removed from the database or altered in any way. The Blockchain therefore contains a verifiable record of history.
What is unique is the absence of a trusted third party (a bank that we visit or to which we log in with a key, an Amazon.com, eBay or whoever you know and trust…) and the fact that the information is recorded publicly, rather than on secured servers behind firewalls. This means that transactions can be faster, cheaper and easier to access, while maintaining security.
The Blockchain enables entities to digitally transfer money and other assets directly, securely and near instantaneously.
The Blockchain reduces the settlement window from few days to maybe a few hours. All the financial industry is based on managing that window. An international transfer could take as long as five days to settle, during which the counterparty can fail or the exchange rate can change or you can have a credit risk. Lots of people, working on managing that risk which is completely reduced, or even eliminated, and all those people and technologies that manage that risk are becoming irrelevant.
Credit card network companies are using the Blockchain to enable micropayments, whose value would typically be too small to process in the traditional manner due to the fixed costs of credit card payments.
Visa, Nasdaq, Citi, Capital One, Fiserv and Orange have come together and invested in Chain.com. They will gather twice a year in a Blockchain working group to discuss their learning.
There are many other industries apart from Finance, who are trying Blockchain:
- Follow My Vote is a non-partisan organization on a mission to restore faith in the democratic process.
- PeerTracks, aims to offer a music streaming platform that lets users listen to music and use the Blockchain to directly pay the artists with no intermediary
- Visa and DocuSign unveiled a partnership that used Blockchain to build a proof-of-concept for streamlining car leasing, and making it into a “click, sign, and drive” process
As digital innovations in technology change the way that money moves around the world, businesses need to keep a close eye on Blockchain and be prepared to adapt and transform their services accordingly.
