Why Block-chain is Scaring Big Banks

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The Year Money Goes Virtual

This is a #BigIdeas2016 presentation, our topic is #FinTech. All opinions my own.

I think it’s somewhat inevitable that money as we know it, is an archaic invention whose time is nearly up. Enter blockchain technology, these applications involving blockchain technology which — are basically tamper-proof system of distributed ledgers which underlie cryptocurrencies such as Bitcoin.

The crazy part, is it’s only in 2016, when we see these ideas finally going mainstream. For years we’ve been talking about cryptocurrencies. The idea of having an international currency that’s really just virtual, is I think where this is all heading. The idea of having to carry around paper and metal as “real money” is getting a bit absurd and barbaric.

There’s whispers that the tech along blockchain, will one day make it to Wall Street. Yes no kidding, really it’s time for Fintech to displace big banks, and for more transparency, accountability and performance. The idea that the online public ledger that tracks ownership of the digital currency via machines spread across the Internet would be more efficient, is not a radical idea. It’s a necessary step in the information age where banking is going to the cloud and where young people want it to be a mobile digital and instantaneous experience.

What will this mean? It may mean the end of financial advisers as know them. Soon wealth health apps will take their place. Banks will go digital and automate a lot of  their activities. And it’s about analytics as well. Today, pre-IPO companies track their stock sales and trades using ad hoc technology like computer spreadsheets. The blockchain can streamline private trading, and give pre-IPO companies a more reliable way of auditing trades in their stock. Not bad, so what’s the hold up? It’s the competition that will occur between FinTech startups, powerful corporations and big banks. Who will champion the leading tech, who will disrupt traditional banking with blockchain?

Blockchain represents a more fair world, where financial fraud would be more difficult. It’s how the cryptocurrency promises complete anonymity while using a crowd-regulated public ledger system. Think of the block chain as a sort of distributed consensus system, where no one person controls all the data. At least, in theory.

Many experts believe Bitcoin itself may never really gains traction, block chain technology has enormous promise.  For instance, some people argue that a block chain system would have prevented the massive credit card breach at Target. Who knows? Time will tell, but the momentum of blockchain as a theory and a system with the power to disrupt, has more weight behind it than Bitcoin itself ever did. This is because of the rate at which technology is influencing financial institutions and the variety of transactions we make with regards to our financial management both as individuals and as corporate entities.

Banks are working now in a frenzy, with their own “blockchain labs” trying to figure out how best to use the technology, before they lose out big to a startup or a big corporations that finds a solution first. It’s maybe the most interesting tech race in 2016. If the stock-market is a game for financial brains, the game just got a new player. Block-chain has essential gamified finance, and made it even less “real” than it has been since 2008, when it was clear that the system had loopholes and cheats that a lot of people were taking advantage of.

If  blockchain is a technology that is used to continuously record every bitcoin transaction that takes place. If it is the distributed database or public ledger that updates itself every 10 minutes and is the technology that underpins bitcoin. It’s not hard to imagine a future where AI could easily hijack economic power from human beings that for the most part won’t have the capacity to understand their own financial systems.

As machine learning gets more embedded in our society’s matrix, it’s becoming apparent that it’s not just getting smarter, and automating stuff, it’s making the “system”, conveniently more distant, virtual and elusive from the understanding of the general public. As if the legalese of finance wasn’t arcane enough to the layperson, it’s now gotten a techie flavor with block-chain that is already confusing a lot of people, even a lot of smart people in finance. Finance happens to be where a lot of our greatest minds go to make a quick dollar. So when block-chain has become a trending topic, people are racing for the money.

That’s one reasons the speed of innovation accelerates to such a pace in 2016, it’s because the profit motive still underpins the kind of society, capitalistic quasi democracy, we live in. To assume that our capitalism hasn’t completely corrupted our version of democracy, would be naive. Block-chain is another kind of cloak and dagger, it’s the kind that says out with the old, and in with the new.

This article was first published here.