What financial service providers should know about blockchain: Opportunities and threats
It seems that every few years, an advanced and innovative new technology emerges and becomes the next big thing for organizations across different industries. Take the cloud and big data, for example – during their buzzword stage, these concepts were being attached to just about everything in the tech space.
Currently, it appears that blockchain has filled this space, popping up in discussions and initiatives within all types of businesses. For financial services in particular, though, it’s very imperative to not only understand the basics of blockchain, but also examine the kinds of threats and opportunities this concept will bring.
Where to start: The basics
First and foremost, financial service providers must understand what blockchain actually is. In the current industry, this can be difficult, as there are an array of different definitions available. But the main points common across expert explanations include:
- Blockchain is the underlying technology that makes cryptocurrencies like Bitcoin possible.
- Blockchain is a digital ledger wherein the information associated with cryptocurrency transactions is checked and verified.
- Cryptocurrency miners doing this verification must also leverage powerful computer systems in order to resolve hash functions in order to add verified transactions to the blockchain.
- Once a transaction is verified and the associated hash algorithm is resolved, the transaction is included in the next block of the blockchain, which is then unchangeable and part of the overall digital ledger.
- Cryptocurrency miners receive a small digital currency profit for their efforts.
Without this system, there would be no way to verify or track the transactions taking place with digital currencies. And as new cryptocurrencies emerge, additional blockchains are established to underpin the value of the currency.
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