If you’re watching FinTech disruption and how it’s impacting financial services, you’ve already been drawn into many conversations about the blockchain. But your enthusiasm most likely dissipates when the term bitcoin invariably comes up. The much-hyped digital currency has experienced growing pains since its value spiked in 2013 and was later linked in the public’s mind with such unsavory players as Silk Road, the online black market selling illegal drugs , and Mt. Gox, the once-dominant bitcoin exchange that vanished under suspicious circumstances.
But while the blockchain served as the underlying technology of bitcoin, its value as a distributed ledger for recording transactions isn’t by any means limited to cryptocurrency. As a transaction database, the blockchain can be used for any financial instrument that can be issued in digital form: stocks, bonds, derivatives, deeds—pretty much any asset that needs to be held in custody and cleared as part of the transfer process.
Yes, that’s as massive a potential market as it sounds, which means that blockchain technology has the capability to reshape the financial services market. Plenty of financial institutions already have begun to invest, and they are testing concepts in the marketplace. Blockchain networks will go live this year and come 2017, even as the rhetoric cools down, the marketplace will begin anointing which among those blockchain networks will have the clout and credibility to change the structure of the markets they serve. Those who are early to deploy networks of blockchains hope to grab the lion’s share of the opportunity, serving a key role in setting the terms and identifying partners.
No matter which corner of the industry the blockchain strikes first, however, there can be little doubt about how it will ultimately reorder the entire financial services industry. The end result will be a much smaller, faster, and more […]
