Blockchain is the technology that enables the existence of cryptocurrency (among other things). Bitcoin is the name of the best-known cryptocurrency, the one for which blockchain technology was invented. A cryptocurrency is a medium of exchange, such as the US dollar, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds.
Blockchain also has potential applications far beyond bitcoin and cryptocurrency. Blockchain is, quite simply, a digital, decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The major innovation is that the technology allows market participants to transfer assets across the Internet without the need for a centralized third party.
From a business perspective, it’s helpful to think of blockchain technology as a type of next-generation business process improvement software. Collaborative technology, such as blockchain, promises the ability to improve the business processes that occur between companies, radically lowering the “cost of trust.” For this reason, it may offer significantly higher returns for each investment dollar spent than most traditional internal investments.
Financial institutions are exploring how they could also use blockchain technology to upend everything from clearing and settlement to insurance.
When a technology moves so quickly, it’s dangerous to sit on the sidelines. We’re watching blockchain 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. Blockchain technology could result in a radically different competitive future for the financial services industry.
Want to dive a little deeper? Here are four resources to help you better understand these changes and what they mean for both businesses and consumers: