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Blog February 21, 2019

Blockchain in 2018

Blockchain in 2018

It has been a cryptocurrency rollercoaster since the end of 2017, leading into the beginning of 2018. As I write this on January 30th, Bitcoin is trading below $10,000, a $9,000 decrease from its peak in mid-December. Also in today's news, Facebook has announced a ban on advertisements for Initial Coin Offerings (ICOs) and the SEC froze $600 million in crypto assets of a potential fraudulent ICO.

However, we aren't going to spend time speculating on whether cryptocurrency is a fad or possibly the result of tax returns on the crypto market.

2018 will be the defining year for Blockchain, the underlying technology that facilitates the trading of Bitcoin and other cryptocurrencies. Blockchain, a methodology of creating immutable records of information, has been around for ten years. This technology has undergone multiple iterations and now it must prove its worth. Blockchain is a foundational technology, a supporting or facilitating technology, not a cure-all. The general public will not realize that new advances are derived from the support of Blockchain.

What will change?

Currently, transferring funds between banks is a time consuming and costly process. The banks must communicate, ensure accounts have proper funds and trust the other financial institution to follow through on their end of the transaction. This settling process can take days and a fee will be accrued somewhere along the way. It is safe to say that all banks should be able to handle these transactions if they do not exceed a couple thousand dollars. But, would you trust a request for $150 million? Or a multi-billion-dollar aid transfer from the IMF? Imagine the settling time and fees associated with that transaction. Enter blockchain: If large banks were to partner on a private blockchain network, these issues could be solved. Given the way in which blockchain transactions execute trust, default issues would be drastically reduced. Settling time would decrease, thus increasing liquidity. This blockchain would continuously store all transaction records, thus improving transparency and compliance ability.

Large financial institutions are here to stay. Will their roles and responsibilities shift? Certainly. That being said, there will always be a need for credit, large loans and financial advice. As previously stated, blockchain is a foundational technology, not a disrupter. Banks should not be worried; this technology will simply allow them to provide more robust service offerings to their customers.

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