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Blockchain, Distributed Ledger Technology and Finance
Following up on our previous post on FinTech, let us look at how Blockchain works and how it has led to spin-offs from this disruptive technology. Below is a simple diagram from Financial Times explaining how Blockchain technology works.
Basically, Blockchain is a type of cryptography (Oxford Dictionary defines it as “The art of writing or solving codes.”) that harness the advancements in e-technology to provide an open yet secured database. Any change in this database needs to be verified and approved by users with the correct keys to the encrypted data package. WEF (World Economic Forum) describes it as “Using cryptography to keep exchanges secure, blockchain provides a decentralized database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.“
This technology is made famous by Bitcoin which is an online currency originally created for one person to pay another party online for services or goods without fiat currencies and without need of going through a traditional bank or middle man. i.e Tom in Singapore can send money directly via the internet to Harry in London without using any banks, remittance companies or intermediaries. The famous story of Bitcoin creator Nakamoto paying 10,000 Bitcoins for pizzas (then worth 2 pizzas now worth USD 11 Million) can be found here.
Distributed Ledger Technology
Blockchain technology quickly took a life of its own, generating a lot of hypes and spurring many investments in this disruptive life changing technology. One of the few notable ones like Distributed Ledger Technology which is based on the very fundamental of the Blockchain technology, has seen many Banks and Financial Institutions exploring and investing in it. Some even backed this as “the technology that will transform financial services as well as other industries“! Below is how Deloitte see the many usage of Blockchain Technology.
Bain and Co did a research on Distributed Ledger Technology and found that 80% of their respondents expect their firms to adopt this technology by 2020.
They further concluded that “the winners will be those that push the pace of change, rather than resist it.”
Will you resist or adopt it? My friends, its time for us to relook and adapt.