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Repurposing Bitcoin technology: Blockchain, the basis of Bitcoin, is creating a lot of buzz in the financial world. — AFP

Blockchain and why the financial sector is all excited about it

Tuesday, 6 September 2016

Repurposing Bitcoin technology: Blockchain, the basis of Bitcoin, is creating a lot of buzz in the financial world. — AFP
Repurposing Bitcoin technology: Blockchain, the basis of Bitcoin, is creating a lot of buzz in the financial world. — AFP

 

At the recent Stratum Focus seminar conducted by Hong Leong Investment Bank Bhd together with the national Exchange, Bursa Malaysia Bhd, it was clear that the banking industry is now poised for a disruptive change brought on by Financial Technology, or FinTech for short.

“The impact of FinTech is far reaching and no company or business will be unaffected by this dynamic shift,” said Lee Jim Leng, group managing director of and chief executive officer of Hong Leong Investment Bank Bhd.

In fact, many of the speakers at the seminar agree that like how Uber and Airbnb have challenged the status quo, the banking industry is also very likely to be the next in line to be affected by similar disruptive technologies and services.

One such technology that has become a buzzword in the financial sector is Blockchain.

Blockchain is the technology behind Bitcoin and it’s the reason why Bitcoin as a concept works.

Put simply, since it’s not a physical thing, a virtual currency like Bitcoin requires a way to log transactions, track ownership and the number of Bitcoins in the market.

That technology is the Blockchain – essentially an online ledger that logs every transaction, this ledger is protected by cryptographic signatures and instead of having a central server which stores this ledger, the Blockchain has a copy of itself distributed across the entire network of users.

According to Mark Smalley, chief executive officer and co-founder of Neuroware, Blockchain’s distributed nature and built-in security is one of its greatest strengths.

Unlike a system which stores the ledger in one central server where the entire network can effectively be disabled by knocking out that server, every member in a Blockchain network has a copy of the ledger, which means that as long as at least two members are still on that network, the entire system will continue to work.

Smalley, whose company produces the middleware for companies that intend to use Blockchain technology, says that this distributed database with an immutable, tamper-proof audit trail is what makes it an ideal technology in the world of finance.

Today, when two parties make a deal, the cash and assets take time (and money) to transfer to the respective parties, simply because the related records are located in different institutions and many different parties are involved in reconciling this information so that the transfer is recorded properly.

Blockchain technology potentially eliminates all this because both parties will have (and be maintaining) an identical copy of the shared ledger – the way that the technology works is that once information is entered and verified in the ledger all copies of the ledger will be updated with the information, therefore simplifying and drastically cutting down the time it takes for assets to change hands.

This year alone, some 60 banks around the world (including in Singapore) have started work on or are investing in Blockchain technology, said Smalley.

Meanwhile there’s also a lot of interest in Blockchain technology in this country – Smalley says he’s spent the last nine months educating various local financial institutions and governmental bodies on Blockchain, although non-disclosure agreements means that he’s not at liberty to elaborate.

Source by: The Star Online

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