Blockchain, in short, is a growing digital ledger which carries electronic financial transactions and keeps track of each “block’s” transaction data including the participants, dollar amount, and timestamp. Despite being a relatively new idea, being invented in 2008 originally to be the public transaction ledger for the cryptocurrency Bitcoin, blockchain has quickly become incredibly popular to various enterprises. Additionally, firms have moved past blockchain’s proof-of-concept and are now moving towards trials and commercial rollouts. In this tech talk, we will explain the advantages and disadvantages of blockchain technology being introduced into the mainstream financial markets.
There are multiple advantages of transitioning to blockchain technology. One clear advantage is that blockchain is an open source ledger which keeps every transaction available to the public taking fraud out of the question. This is made possible by having the blockchain system consistently monitored by data miners who keep track of the transactions being made. Another advantage to blockchain is that there is no government interference. Since the blockchain technology is based on virtual currency there is no government or financial institution that could possibly inflate or print too much of the currency. Finally, blockchain provides nearly instant transactions and improved financial efficiency. This is a major advantage because while traditional bank transactions take a couple days to complete, blockchain transactions are completed in minutes. Similarly, these direct transactions through blockchain are much more efficient than traditional banking by not relying on third parties such as banks and other financial institutions.
Additionally, there are disadvantages to using blockchain technology. First, it is a problem for the employees who are not tech savvy to use. Many employees are older and are uninterested in change. This may be a problem for financial institutions who are looking for change. Secondly, the complexity of the technology may also be a problem for implementation. It will take a very intelligent and knowledgeable team for it to be successfully implemented. Lastly, the security of the technology has not yet been confirmed to be secure. It is said to be extremely secure since there is very little human interaction, but it does not prevent technological error. There are many disadvantages to blockchain technology, but many companies agree that it is a way of the future.
Over the past summer, Lindsey received the opportunity to intern at the investment bank, Goldman Sachs. During the summer, Goldman Sachs hosts a global pitch competition for interns in all locations. My team pitched blockchain technology for their sales and trading operations team, and it was a very controversial topic across senior leadership. Some leaders were for it, but a majority were against it.
The senior leadership that was for it believed that blockchain technology was going to revolutionize the finance industry whether Goldman Sachs was the first investment bank or not. This disruptive technology is very controversial because people believe that it is just a trending topic and will make the financial operations more complex.
Blockchain technology is a very complex idea that most people in the finance can not wrap their head around. It will completely disrupt the technology in finance, and will push financial institutions ahead if they are to adopt it.
Questions:
- Do you believe blockchain technology will revolutionize the finance industry or is it currently just a popular topic?
- Will blockchain technology hurt or help corporations in streamlining their processes and operations?
- What investment bank do you think will first adopt blockchain technology and open up a cryptocurrency trading desk?
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