Blockchain would be the next big thing. That would completely change the way we handle money. Banks would even become redundant. Although there are countless investors who closely follow cryptocurrency prices and who make profits or losses with their crypto investments, the great revolution has not yet happened.
It’s not crazy. Revolutions are rare throughout the history of mankind. Man likes evolution rather than revolution. Fortunately, for revolutions often spread unchecked. An evolution can be better controlled, integrated into society and has the greatest chance of success.
What is Blockchain?
Blockchain is a decentralized ledger that is not maintained by a central authority, but by a collective – a network of computers. Blockchain makes it possible to store and transfer information. Information is a broad concept. This may, for example, be digital information to which a monetary value is attached, also known as digital currency. The best known example of this is Bitcoin. However, information can also be something else, such as the number of votes in an election, contracts or tax information.
The great advantage of blockchain is that a change to the general ledger can only be made if all the computers in the network approve this change. So a central government or a hacker cannot manipulate the information because the other computers in the network will then reject the change. The more computers on the network, the more secure the network. In other words, blockchain offers new security perspectives. For example, it can help prevent election manipulation.
Disruptive operation of blockchain
In fact, if you transfer money from one account to another today, the recipient will first receive the information about that transaction. Only later will the transaction itself take place. This is because the money is not stored in the information itself. Incidentally, you do not notice this, because the banks are building bridges over this period.
This way you can already spend the money. In other words, the bank ensures that money transactions run smoothly. However, blockchain makes the bank redundant as everything is transferred instantly. Of course, this also means that the role of the bank is changing and that the banks will have to reinvent themselves.
Among other things, ABN AMRO is therefore already experimenting diligently with blockchain. Based on different scenarios, it is examined how the banking sector will change and what role ABN AMRO can play in this. In the port of Rotterdam, for example, experiments are being made with registering shiploads via blockchain. For such experiments, people work with technology companies and universities.
Not only banks are feeling the hot breath of blockchain. An important application deserves an explanation: smart contracts. With a smart contract, an agreement is converted into programming languages. All conditions are programmed and if the conditions are met, the agreement is executed automatically. It is a solution for situations where there is a lack of trust.
Before the smart contracts, the only alternative was to involve a third party – such as a civil law notary – who took on the controlling role. However, smart contracts are more accessible and cheaper. The notary may also experience the disruptive effect of the blockchain. In practice, the legal sector is also exploring the new blockchain options.
More of an evolution than a revolution
In the short term, it does not look like blockchain technology will spread like wildfire. If it changes the sector, it will be an evolution rather than a revolution. This is also confirmed by SWIFT (Society for Worldwide Interbank Financial Telecommunication), the organization that regulates worldwide payment traffic and from which a number of Russian banks were recently banned.
In a recent study, it concluded that distributed ledger technology (DLT) – a blockchain is an expression of this – is not yet mature enough for use in the financial sector. In other words, the sector and technology must evolve towards each other. And that’s what seems to be happening.