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Why Banks Must Embrace Blockchain Beyond Cryptocurrency
For many, blockchain has become synonymous with cryptocurrency and its volatile nature. Wayne Dix and John Rodgers cover the emerging applications of blockchain in banking beyond cryptocurrency in this Information Week article. Read a preview of the article below.
Blockchain, unfortunately, has been characterized by the media as valuable for its associated speculative cryptocurrencies that have grabbed headlines and attention due to their volatile nature. In so doing, the coverage has obscured the true value of the underlying, highly innovative, and potentially transformative technology.
For banks, blockchain has a potentially significant upside with key, sector-specific applications such as cross-border transactions, fraud reduction and trade finance, to name just a few. The trust and data security that blockchain enables can benefit financial institutions on a number of fronts. While we’re all digesting the recent headlines about FTX, we’d do well to look at some of blockchain’s potential applications and its likely effect on institutional operations.
Indeed, the use cases for blockchain are rapidly expanding. Yet the core capabilities championed by blockchain enthusiasts have been constant: to enable anonymous peer-to-peer trusted transactions without the need for an institutional intermediary. The cryptocurrencies associated with public blockchains facilitate the payment of fees to the providers of the network protocol supporting the transaction. The low cost of these fees and near instantaneous transactions have the potential to cut out the middleman, but it need not be so.
We’re starting to see rising awareness and use by consumers of cryptocurrencies to instantaneously transact peer-to-peer. This in turn raises consumer expectations for transaction processing by the financial services firms with which they do business. Banks have the opportunity to take advantage of blockchain technology to accelerate transaction speeds and reduce errors and costs. Failure to begin experimentation and preparation now may plant the seeds of future decline and disintermediation by upstart technologies that offer greater convenience.
Read the full article here.