Blockchain, the peer-to-peer public ledger that underpins bitcoin, is set to become one of the biggest disruptors within the financial system after receiving significant investment from banks, according to research conducted by BBVA Compass.
Blockchain Technology: The Ultimate Disruption in the Financial System is the latest report released by BBVA Compass. Chief economist Nathaniel Karp led the banks research team when looking into the potential of the technology.
The research team analysed the U.S. economy and Federal Reserve monetary policy, while at the same time creating models and forecasts for growth that gives the financial industry a snapshot of the future of Blockchain.
One of the first industries that may be disrupted is payments. BBVA state that transactions such as money transfers, credit and debit card payments and online payments will change how they operate within the next few years.
Currently transactions such as these require an intermediary, but Blockchain would eventually eradicate the need for a middleman, with transactions occurring ‘‘between the buyer and the seller without any intermediary and the validation of the transaction would happen in a decentralized way or ‘distributed ledger.’’’
Implementing a decentralised system does bring with it a number of concerns. BBVA predict that if the payments industry was to become more unstructured, the system would have to ‘‘possess a massive amount of computer power and efficiently cope with the enormous energy consumption required to support it.’’
It is also unclear as to how a decentralised system would deal with security concerns, such as fraud, tax evasion and terrorism. Karp however believes that the future is bright for Blockchain.
‘‘A technology that has the ability to conduct and verify transactions via an immutable, time-stamped record that is replicated on servers across the globe has immense implications for the banking sector,’’ stated Karp.
‘‘We’re talking about a massive overhaul of the banking industry’s processes and a significant reduction in costs.’’
Karp continues with his analysis, stating that it’s only a matter of time before Blockchain’s disruption becomes far-reaching.
‘‘Blockchain technology could reshape the financial industry well beyond the payments system; it has the potential to change the face of modern finance,” ended Karp.
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