The role of Blockchain technology in finance is increasingly important. This is admitted by 4-crypto-currency veterans, who had a gathering recently in Toronto. However, they also admitted that crypto currency still has many things to do before it really enters the financial institutions. In fact, the technology has huge chances, particularly since CME announced its offering of bitcoin futures contract.
Blockchain technology is behind Bitcoin. Now, its protocol is being used by some big financial institutions. They include Citi and Nasdaq. The blockchain developed by Nasdaq and Citi are inter-operable. In other words, use of Nasdaq can do transaction by using Citi’s blockchain, and vice versa. This indicates that the technology will be much more useful in the future finance.
Problems that Hinder Wide Use of Blockchain Technology
Some questions emerged on why blockchain has not gained a defined position in financial industry. There are at least two problems to answer the questions. They are fluctuating popularity and competition.
Up-and Down in Popularity
Actually, crypto-currency blockchain has been around for several years. However, its wide use of application seems to have some problems. For instance, CTO at Ripple, Stefan Thomas, admitted that his company had welcomed the technology in 2010. They were excited with the inter-operability of the blockchain. The existing systems need such kind of operable technology.
However, blockchain’s popularity was beaten by the appearance of bitcoin. As a result, Ripple got tired of the news that Bitcoin would become a mainstream in financial markets. Even though Bitcoin had not gained an established position in financial market until now, its coming negatively affected blockchain at that time.
Then, Bill and Melinda Gates Foundation revived the name of crypto-currency blockchain during the Sibos conference. The foundation announced its plan to use Ripple blockchain on a banking platform, namely Mojaloop. The open platform aimed at promoting financial inclusion. Again, this brought blockchain back to the stage.
Besides bitcoin, Blockchain actually still has some competitors. For instance, central banks in different countries are testing almost similar platforms, such as Etherum. As a result, Blockchain could not expect anything from the central banks, even after it has been around for several years.
Even though all of the platforms are still under testing process, Blockchain had less opportunity to get into the mainstream. Inability to win the central banks made its position more difficult. As widely known, central banks play crucial roles in the financial industry. Any mention from the central banks dramatically affects a financial business.
Advantages of Blockchain for Financial Industry
As described above, crypto-currency blockchain actually has huge chances to get into the mainstream in financial industry. The following are some advantages of blockchain, which are related to its huge chances in financial industry:
This is one of the most favorable features offered by Blockchain technology. It allows two clients to communicate each other and make financial deals. It is working with the existing financial industry. There may be conditions, in which you want certain digital assets usable by another asset. This kind of smart contract allows the clients to make a deal, such as fund transfer. As long as you set the blockchain in a correct way, it is inter-operable.
Blockchain is actually a cool technology, thanks to its rich features. It delivers transparency, thus making auditing process much easier. Many clients also prefer blockchain since they can have multiple blockchains. This allows the companies to design ledgers and financial features based on their needs. For instance, Ripple have 7 different ledgers. It connected them all for a demo purpose, and they did work.
A Smart and Friendly Technology
Clients that had applied the technology acknowledged some advantages of blockchain compared to any other platforms, such as Linux. Blockchain works better when it is used for general purposes instead of specific application. In this case, blockchain can learn from Linux, which proved a success only in two years after its launching. Linux Project proved its value for developers and business users.
Blockchain maintained its interesting in building and maintaining a friendly competition. It plans to build partnership with other companies. Blockchain should collaborate with other. There is no single thing in financial technology, since every client has different needs.
Finally, Blockchain technology is developing. In will be changing in the coming years until it gains an established position on the market. Even though it has much homework to do, Blockchain has great potentials in financial market. It has some advantages, which allow it to work with other platforms. Such inter-operability may not available from the other crypto-currency platforms.