Bank-based blockchain projects are going to transform the financial services industry
Cryptocurrencies are constantly evolving, with popular currencies such as Bitcoin and Ethereum maintaining their popularity despite recent market corrections.
At the core of both technologies is the cryptographically secure digital ledger known as the blockchain. It’s a digital ledger where cryptocurrency transactions are recorded chronologically and publicly. Indeed, as the popularity of cryptocurrencies has grown, so has the banking industry’s interest in blockchain for fintech, with an increased and focused push on bank-backed blockchain projects.
Some of the largest projects underway include the IBM-backed Hyperledger Fabric project, the Utility Settlement Coin, and R3’s blockchain consortium, signifying a growing acceptance in institutional policy to support blockchain growth.
How does it work?
Currently, banks transact with each other by creating agreements, as one would when purchasing an item from a store. A common example would be a bank agreeing to purchase a specific amount of stock for a specific cash price from another. This process, often cumbersome and slow, takes up to several days and incurs the risk that one party may default or renege on the agreement. This period of time, known as settlement, is such an issue that an Oliver Wyman report identified it as costing the financial industry anywhere from $65-$80 billion a year.
Blockchain projects have the potential to reduce, and possibly eliminate, settlement times due to their digital nature, ensuring the timely and secure processing of these operations. Other uses for bank-backed blockchain projects would include secured global currency exchange rate speeds and increased transaction security, among other benefits, eventually allowing for an overhaul of the banking industry, replacing traditional back-office clearinghouses and other outdated mediums that exist between asset sellers and buyers.
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Source: Bank-based blockchain projects are going to transform the financial services industry | TechCrunch
