Bitcoin and blockchain has come under extreme scrutiny over the past few months and for good reason. It would be advisable to consider anything that increases in price parabolically as a very high risk. Banking bosses, politicians and TV pundits have had their say and it is usually negative but the bottom line is that the blockchain can no longer be ignored.
There is a battle going on inside the offices of the world’s financial institutions. Do they join the misinformed media and authoritarian governments and decry it or do they stand up and join those that are investing in the revolutionary technology.
Too high too fast
The problem is that financial institutions thrive on stability so they are instantly wary of anything that can shoot up by over 3000% in a year. This is exactly what the entire cryptocurrency market capacity has done, powered by its underlying blockchain technology.
In a report by the Financial Times head of emerging technology at Royal Bank of Scotland, Richard Crook, said;
“We are sitting down around this table trying to decide whose lunch we are going to eat. Because blockchain’s benefits come from decentralisation there is little point replacing one technology with another without changing the business model.”
The looming threat to financial entities is that decentralization. It is effectively their job to centralize and control the flows of finances between countries and their citizens. Big players such as JP Morgan and Citibank are anxious because cryptocurrency goes against their business model which is making profit by controlling other people’s money. Banks also reject crypto because of its anonymity; they want to see who is sending what where, supposedly for money laundering reasons.
The World Economic Forum in Davos is holding its first session on ‘the crypto-asset bubble’ this week. Advocates of blockchain have cited their support for the technology claiming that it is resilient to censorship, fraud, and provides an immutable record of transactions. No centralized government, bank or corporation can offer the equivalent while they maintain a tight grip on finances and data.
Crypto has already entered Wall Street with a couple of major exchanges offering futures and even larger trading houses and banks offering to clear them. Energy giants are also looking towards blockchain solutions alongside medical research facilities, security companies, biotech and agricultural industries, social networks, and even some banks. Former Barclays boss, Antony Jenkins, labelled the blockchain effect as profound and went on to tell the FT;
“If you can imagine a world in which you did have one global digital currency, imagine what the benefit of that would be, imagine all the friction and the cost that would come out of the system. These things of course might be far in the future, but I don’t think they are very far in the future.”
Cryptocurrencies remain volatile by nature but it appears that the blockchain that powers them is here to stay.