{"id":1578,"date":"2018-09-05T10:37:00","date_gmt":"2018-09-05T10:37:00","guid":{"rendered":"https:\/\/digiterrebestg.wpengine.com\/?p=1578"},"modified":"2024-05-30T13:12:21","modified_gmt":"2024-05-30T13:12:21","slug":"the-winds-of-change-from-blockchain-have-arrived-in-financial-services-but-there-are-bigger-storms-on-the-horizon","status":"publish","type":"post","link":"https:\/\/www.digiterre.com\/us\/2018\/09\/05\/the-winds-of-change-from-blockchain-have-arrived-in-financial-services-but-there-are-bigger-storms-on-the-horizon\/","title":{"rendered":"The winds of change from blockchain have arrived in financial services, but there are bigger storms on the horizon"},"content":{"rendered":"
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The winds of change from blockchain have arrived in financial services, but there are bigger storms on the horizon<\/h1>\n\n

Blockchain is the buzzword in the financial services sector and big changes are on the way for the sector; but what sort of benefits and changes is it bringing to financial services? Let\u2019s firstly remind ourselves what blockchain is and its role for cryptocurrencies.<\/p>\n \n <\/div>\n<\/section>\n\n\n

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Bitcoin was blockchain\u2019s first application<\/strong><\/h4>\n\n\n\n

Bitcoin is a type of unregulated digital currency that was first created by someone called Satoshi Nakamoto in 2008. Also known as a \u201ccryptocurrency,\u201d it was launched with the intention to bypass government currency controls and simplify online transactions by getting rid of third-party payment processing intermediaries. Of course, accomplishing this required more than just the money itself. There had to be a secure way to make transactions with the cryptocurrency. Bitcoin transactions are stored and transferred using a distributed ledger on a peer-to-peer network that is open, public and anonymous. And blockchain is the underpinning technology that maintains this bitcoin transaction ledger.<\/p>\n\n\n\n

Blockchain,<\/a>\u00a0also created by Nakamoto, is a digital, distributed transaction ledger with identical copies maintained on each of the network\u2019s members\u2019 computers. All parties can review previous entries and record new ones. \u2018Peer to peer\u2019 transactions or payments are grouped in blocks, recorded one after the other in a chain of blocks (the \u2018blockchain\u2019). The links between these blocks and their content are protected by cryptography, so previous transactions cannot be destroyed or forged. This means that the ledger and the transaction network are trusted\u00a0without\u00a0<\/em>a central authority, the \u2018middleman\u2019, such as a bank or trading exchange. Pre-blockchain, organizations like banks injected the continuity that the \u2018virtual world\u2019 of email and the internet lacks by verifying individuals, things, transactions and ownership.\u00a0This was and is a very inefficient process and drives up transaction costs. With the blockchain network itself establishing continuity, network participants can trust in the authenticity of transaction data and directly exchange value between each other, resulting in lower transaction costs.<\/p>\n\n\n\n

The reason for other excitement over blockchain is it\u2019s not just one gigantic database.  It is more like several databases of blocks, sequenced in time, where each block is hashed. In bitcoin, this matters a lot because it uses something called \u2018proof-of-work\u2019. The proof-of-work is the arbitrary rule that everyone agrees is a designator of \u2018the truth\u2019. And by chaining the proofs-of-work, it becomes exponentially more difficult to modify old records because modification of an old record would mean re-generating all the proofs-of-work in the blocks that came after it, to match the blockchain pre-modification. So in other words, if a value is written to the bitcoin blockchain, then it\u2019s not changing. Ever. This is also exciting because it\u2019s the first genuinely immutable public record.<\/p>\n\n\n\n

Blockchain is driving multiple benefits across multiple financial service areas<\/strong><\/h4>\n\n\n\n

Blockchain is re-shaping the financial services industry by making transactions faster,  cheaper and critically, more accurate. For example, in securities trading, a three-day handling time is common; also friction is plentiful in trading with an estimated 20% of all transactions generating errors that require human intervention. There are other multiple benefits, including:<\/p>\n\n\n\n