A lot of friends ask me questions about the emerging of Blockchain revolution. According to the recent news, four of the world’s biggest banks have teamed up to develop a new form of digital cash that will become an industry standard to clear and settle financial trades over blockchain. Meanwhile, Ripple raised $55 million in Series B Funding. In my opinion, it’s no doubt that blockchain has the potential to disrupt everyday banking.
What is it?
Blockchain is a data structure for creating digital ledger of transactions shared among a distributed network of millions and millions of computers. It uses state-of-the-art cryptography to manipulate the ledger in a secure way. It is based on the concept of consensus where every nodes agree to every transactions, therefore avoids the need for a central counter party (CCP) model in the tradition settlement process.
How is it used?
The border implications of the blockchain is that cross-currency payments can be settle more efficiently by eliminates time delays and lower back-office costs. Customers nowadays demands for faster, lower-cost global payments, where blockchain allows direct bank-to-bank settlements. Some use cases of the protocol includes remittance service for retail customers, international transaction, corporate payment and cross-border intra-bank currency transfer.
What is the innovation?
It leads to opportunity that we can do transactions and satisfy double coincidence of wants without knowing who the other party is. The biggest innovation is the idea of a distributed database where trust is established through mass collaboration rather than a powerful institution that does the authentication and the settlement.
What problems could be solved?
The sorts of problems it could solve is beyond financial market since the technology could offer an immutable record that we can trust. Existing identity infrastructure is broken and easily compromised. In blockchain, once a block of data is recorded, it’s very hard to change, thus it can be used for genuine privacy protection. All copies of the existing blockchain run algorithm to verify the transaction when someone wants to add to it. Any malicious attempt to defraud the system would be rejected, while the proposed transaction will be approved when a majority of nodes agree it is valid by identifying matches with the blockchain history. As a result, it can be used to create an open protocol for identity on the web that creates a ‘web-of-trust’ and stores data encrypted.
References
- Martin Arnold, “Big banks plan to coin new digital currency”, the Financial Times, August 24, 2016, https://www.ft.com/content/1a962c16-6952-11e6-ae5b-a7cc5dd5a28c
- Alyssa Jarrett, “Ripple raises $55 million in Series B Funding”, Ripple official website, Sept 15, 2016, https://ripple.com/insights/ripple-raises-55-million-in-series-b-funding/
- Don Tapscott, Alex, Rik Kirklandm, “How Blockchains could change the world”, McKinsey & Co, May 8th, 2016, http://www.valuewalk.com/2016/05/blockchains-change-world/?all=1