Former Barclays Bank CEO: Does the advent of blockchain mean the end of the traditional financial system?

My many years of work experience in the banking industry has taught me that the time is ripe for financial services reforms to be guided by new technologies.

For example, my new job, 10x Future Technologies, aims to clean up the barely functioning pyramid of mainframes, servers, networks, protocols and other IT aspects that we rely on to run our vital banking business every day. By cleaning it up, financial services providers will be able to provide better, faster and more affordable services. Banks need to innovate and remain agile in the coming decades to adapt to the cyclical waves of change brought about by technology. As I recently told the BBC's Newsnight, one of the most exciting innovations is blockchain technology, which has the potential to reshape the way we use money and build a high-quality, low-cost, secure, fair and transparent financial system.

Today I am joining the board of directors of Blockchain, a company that will help make this technology a reality and usher in a new era.

Breaking the status quo

Money is such an important part of our lives that it is hard for us to step back and think about how it works. We have long been accustomed to it. For example, we are naturally accustomed to the traditional banking system that determines our financial life, payment processing, mortgages, and account balance supervision. It is difficult for us to think whether this system is the best design, and it is even more difficult for us to agree to disrupt all the balances maintained by the original system.

Although financial services are constantly innovating and improving the banking user experience, what they are doing now is only improving the edges of the core system, and the main parts of the basic system have not changed. The huge demand for electronic services has led us to turn to better ways of processing - electronic mortgages, online transfers and digital savings accounts, which are still core services like traditional banks. Only when these core services are completely innovated and truly disruptive innovations bring benefits to users, the financial system as a whole will strive to become a reality.

Let me explain. When we think of a bank, most of us picture an institution that provides day-to-day services such as bank transactions and deposits. But traditional banks are also the ultimate custodians of the financial system, responsible for all kinds of transactions, payments and account tracking. Thanks to banks and the networks that connect them, when you agree to transfer £10 to me, I know you can do it.

The reality is that even when you use new electronic services like online mortgages, which compete with products offered by traditional banks, these new services still rely on existing networks between banks to clear payments and manage funds.

The future of digital currency is bright

However, blockchain brings us a new way. Instead of relying on the old centralized computer system to accurately record people's financial accounts, digital currencies will use distributed ledger technology, and importantly, an unalterable ledger to track and record transactions and funds (ledgers). Unlike the current system, an unalterable ledger does not need to be controlled by any one institution because it cannot be tampered with unless more transactions are added to the tamper-proof electronic record.

Instead, the ledger can be accessed by anyone, and the details of the transaction are hidden in an unbreakable code that no individual or financial institution has the key to decipher. It is completely decentralized, or "distributed." Unlike current banking computer systems, an unchangeable chronological archive of records makes fraud impossible, which will greatly improve security.

Full opening of financial services

Blockchain technology will likely have a huge impact. Traditional bank bookkeeping functions will no longer be necessary because bookkeeping can be transmitted through a digital system. Online service providers or a large number of other brands can provide financial services directly through blockchain. These financial institutions that are eager to embrace new technologies will find huge opportunities for their businesses.

For users, this could significantly reduce the cost of financial products through greater competition. Peer-to-peer services will become the norm, and customer choice will explode. With lower cost access, millions of people in the developing world will have easier access to the financial services we take for granted.

My philosophy has always been that there is no choice between doing a good job in finance and being responsible in business. As these new technologies begin to penetrate the entire financial system, the faster, cheaper and safer banking products they bring will help accelerate social and economic progress and improve social benefits.

Driven by this vision, Blockchain is working on technologies that will power this new ecosystem. By joining the board, I hope to further our mission to ensure financial openness by unlocking the full potential of software.