Blockchain technology is a popular topic that is widely discussed. In short, blockchain is a technology that allows for a decentralized record keeping, you can learn more about how it works here. Many associate blockchain with cryptocurrencies, but in fact the technology has many more use cases. In this blog post I will look into possible use cases within the financial industry, looking both at what currently is possible and what might be possible in the future.
One function that blockchain technology can help improve is international money transfers. If you have ever tried to transfer money across borders, you know that this process can take multiple days. JPMorgan Chase is trying to make this process more efficient with a project called Interbank Information Network (IIN). According to the article, the transfer would happen instantly with this technology. The article also notes that even though IIN has some benefits, it is not expected that it will save anyone any money and it cannot handle more than 300,000 transactions per day.
In the future, blockchain can potentially be used to make process of exchanging assets and payments more efficient after a trade is made. According to an article by Goldman this can be done using a smart contract. The smart contract “can connect to multiple blockchains, tracking multiple assets, so it can swap those asses as needed to execute the transaction”. If two people want to trade with each other, the smart contract verifies that one person has the stock and the other person has the payment, and if everything is ok, then the transaction happens without an intermediary.
Blockchain has the potential to improve the finance industry, but how and when is hard to tell. So far, the time and money spent to find use cases for the technology has not resulted in anything revolutionary.
- Do you believe that blockchain has the potential to improve the finance industry, or is it more a hype?
- Do you believe it is more likely that some blockchain technologies will be incorporated into the system that we have today, or do you believe it will fully revolutionize how transactions are being made?
- Much of the hype around blockchain has been that it could decrease costs, but as with the IIN example above, this is not always the case. As billions of dollars are being spent on experimenting with blockchain, do you believe this will pay off?
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I think blockchain is definitely going to improve the finance industry. I personally view it more as something which compliments what we currently have as opposed to being something revolutionary. I think there is definitely payoff and I imagine businesses agree since they are so heavily investing in it!
ReplyDeleteI agree with your comment that it is more likely something that will compliment the current system compared to something revolutionary.
DeleteI agree that blockchain has the potential to revolutionize the finance industry, as well as a myriad of other industries. While your article definitely paints a nice picture, I would argue there are some fundamental flaws with blockchain. According to an article by Forbes, blockchain is notoriously slow. Take Bitcoin for example. Purchasers of Bitcoin often complain that transferring and even purchasing something with Bitcoin is an extremely slow process which can take days to complete. This is obviously a huge downside to blockchain, especially in the Finance industry.
ReplyDeleteThe other thing to consider with blockchain is the security of each transaction. Since each transaction is encrypted and anonymous, how do customers verify where they are sending? Yes it is true the transaction is safely delivered to its location, which is a huge benefit for security purposes, but it is more risky to send money to someone that can't be verified in the system.
I definitely believe blockchain is a game changer, but right now it is too risky and requires a significant amount of computing power to operate and maintain. It is possible blockchain is an anachronistic technology that requires much more technological advancements in order to seriously consider its universal adoption.
Link to Forbes article: https://www.forbes.com/sites/bernardmarr/2018/02/19/the-5-big-problems-with-blockchain-everyone-should-be-aware-of/#4f5fad651670
Interesting article and good points on things to be aware of. The fact that the current process in some instances is too slow is defiantly a problem, and something that needs to be fixed before it can be effective in the finance industry.
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ReplyDeleteThe presence of blockchain technology in financial services is a very appealing concept; the ability to transfer money accurately without the need of an intermediary is the ideal system. This past summer I did an internship with a global investment bank, and blockchain was certainly a hot conversation topic. It was often brought up in conference meetings as a potential long-term solution to many of the challenges that banks face today. However, It did not appear as if the technology would be applied soon, but potentially several years from now when problems such as transaction speeds and computing power can be reduced.
ReplyDeleteThank you for the comment, it will be interesting to see how the technology evolves over the next several years.
DeleteBecause blockchain is so closely associated with crypto currency, I feel like many people may think of it as having sort of a negative stigma attached to it. While the technology is extremely advanced and versatile, some people may distrust it. I agree that international money transfers can be an excruciating and timely process. It is exciting that some huge companies are looking at any technology they can to try to mitigate this issue. My only concern with these companies moving forward with the use of blockchain is that their clients may not potentially be comfortable with such a new and developing technology being used to transfer their funds.This is solely from the perspective of someone who knows very little about crypto currency and blockchain. I am sure that the more I learn and read about it, the more comfortable and trusting I will be with it.
ReplyDeleteInteresting topic Chris, I worked for a cryptocurrency start-up last summer and learned a little bit about blockchain during my time with the company. Never knew that there was more ways that it could be used throughout the financial industry. I honestly think there is a lot more it can do for the industry as a few years ago blockchain was non-existent in the world. I honestly don't know if the current system will be able to support new market functions, only time will tell. I believe if a company has the assets to invest they will as this could lead them to having a competitive edge in the marketplace which is what every company is always seeking to have.
ReplyDeleteAfter doing a lot of research on blockchain myself, I can safely say it we revolutionize the way people do business. I definitely think it can have a huge impact on finance. That impact I can see being both positive and negative. On the positive side, it can truly encrypt financial data to the point where data breaches would become near impossible, on the flip side of that it can make illegal money transfers invisible to the public eye. I believe in the near future it will completely revolution money transfers and won't necessarily just be integrated into current systems. I believe companies would need a whole new system that could support these operations. I don't think blockchain will really decrease costs for most companies, but it will make their data far more secure and actionable.
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