In the past year, the speed of exploration and adoption of Bitcoin’s underlying technology Blockchain is without precedent, according to PWC leaders.
A Blockchain is a combination of time-stamped and digitally signed transactions hosted on an accessible ledger. Quick and transparent, it’s been hailed by many as having importance to rival the internet itself.
“We are watching it move from a startup idea to an established technology in a tiny fraction of the time it took for the Internet or even the PC to be accepted as a standard tool,” say the PWC experts
. “Financial institutions are already beginning to realize the potential of this next-generation business process improvement software to structurally alter shared practices between customers, competitors and suppliers.”
Last year was a breakthrough year
for Blockchain. In the space of 12 months, we saw the world’s leading banks put their weight behind the technology, Nasdaq announce plans to open a Blockchain platform, and the Australian stock exchange come out publicly saying it is “seriously considering” replacing its current clearing and settlement system with Blockchain technology.
2016 will likely see an acceleration in this trend, and prototypes will start becoming a reality. A the end of last year, Blockchain organisation R3 announced that it had assembled a consortium of 42 of the world’s largest banks
to investigate the use of Blockchain. Linux is also spearheading a new movement and Deutsche Boerse, JP Morgan, Cisco and IBM are all looking to build a new Blockchain based on open source technology.
The technology was also identified by the UK Chief Scientific Advisor in the Fintech Futuresi
report as one of the four key areas of technological development for the UK sector.
Whether, in terms of innovation, it’s on a par with the internet or not, this new way of storing and accessing information is as important as the idea of the client/server database model was thirty years ago. But those who believe its applications are limited to fintech are in for a surprise as the technology could ultimately provide for self-service government, say its proponents
Initially developed, along with Bitcoin, as a ledger to enable people to transfer money to each other without a bank, there are now plenty of developers and entrepreneurs proposing Blockchain uses such as writing executable contracts without lawyers and automatically settling the transfer of stocks and bonds without a clearing house. Applications that could publicly and immutably record everything from the birth of a child to a transfer of property ownership are being built on top of the Blockchain. It could also become a critical piece of infrastructure for governments to implement what’s termed "responsive open data” that responds to the commands of citizens on demand.
As the Blockchain grows, it becomes harder and harder to manipulate past transactions since the records of each are built on top of each other. This interdependence in the stacks of transactions gives permanent integrity to the recorded sequence of events and facts.
However, it’s critical that transactions, contracts and documents are verified on a globally accessible public ledger -- ensuring that the information stored on it cannot be deleted or manipulated. If these data-integrity standards are adhered to, the blockchain has the potential to become a powerful tool.
Challenges still exist. Finding information on the blockchain is difficult, although developers are working on tools and a applications to address this and other issues.
Currently, Bitcoin has scalability limitations and security concerns. Until sophisticated new protections for digital-wallet software and hardware have been properly stress-tested in the real world and the digital currency gains more mainstream acceptance, many in the general public will mistrust it -- and that makes it harder for governments to embrace both the Bitcoin and the Blockchain.
But undoubtedly, the Blockchain has enormous potential and could help support more open and fair societies. According to PWC, it could usher in a radically different competitive future in the financial services industry, where current profit pools are disrupted and redistributed toward the owners of new highly efficient Blockchain platforms.