Has the evolution of blockchain(r) turned the banking sector upside down?

Blockchain is going to be the next big thing. It will completely change the way we handle money. Banks will even be redundant. Although there are many investors who cryptocurrency quotes who profit or lose with their crypto investments, the big revolution is yet to take place.

That’s not crazy. Revolutions have been rare throughout human history. Humans prefer evolution to revolution. Fortunately, because revolutions often spread out of control. An evolution can be better controlled, integrated into society and has the greatest chance of success.

What is Blockchain?

Blockchain is a decentralized ledger that is managed not by a central authority, but by a collective – a network of computers. Blockchain makes it possible to store and transfer information. Information is a broad concept. This might, for example, concern digital information related to monetary value, also known as digital currency. The most famous example of this is Bitcoin. However, the information can also be something else, such as voter turnout during an election, a contract or tax information.

The big advantage of blockchain is that changes to the ledger can only be made if all the computers on the network agree to these changes. So the central government or hackers cannot manipulate the information, because other computers on the network will then resist the change. The more computers in the network, the more secure the network. In other words, blockchain offers a new security perspective. For example, it can help prevent election manipulation.

Disruptive blockchain operation

If you transfer money from one account to another today, the recipient actually receives information about this transaction first. Only then will the actual transaction take place. That’s because money is not stored in the information itself. By the way, you don’t notice it, because banks bridge this period.

This way you can already spend money. In other words, banks ensure that monetary transactions run smoothly. Blockchain makes banks redundant, because everything is transferred instantly. Of course, this also means that the role of banks is changing and banks must reinvent themselves.

Therefore, ABN AMRO, among others, is already experimenting vigorously with blockchain. Based on various scenarios, examine how the banking sector will change and what role ABN AMRO can play in this regard. The port of Rotterdam, for example, is experimenting with registering shiploads via the blockchain. For such experiments, people work closely with technology companies and universities.

It’s not just banks feeling the hot breath of blockchain. An important app deserves an explanation: smart contracts. With smart contracts, agreements are turned into programming languages. All conditions are programmed and if the conditions are met, the agreement is automatically executed. This is a solution for situations where there is a lack of trust.

Before smart contracts, the only alternative was to involve a third party – such as a civil notary – who assumed the control function. However, smart contracts are more accessible and less expensive. Notaries can also experience the disruptive effects of blockchain. In practice, the legal sector is also investigating the possibilities of new blockchains.

More of an evolution than a revolution

In the short term, it seems that blockchain technology will not spread like a revolution. If it changes sectors, it will be an evolution rather than a revolution. This was also confirmed by SWIFT (Society for Worldwide Interbank Financial Telecommunication), the organization that regulates payment traffic around the world and from which a number of Russian banks were recently banned.

In the current study, it was concluded that distributed ledger technology (DLT) – blockchain is an expression of this – is not yet mature enough for use in the financial sector. In other words, the sector and technology must evolve with each other. And that’s what seems to be the case.

Rebecca Burke

"Coffee trailblazer. Analyst. General music geek. Bacon maven. Devoted organizer. Incurable internet ninja. Entrepreneur."

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