Peter Todd: Banks have long had ideas about blockchain

When many people think of computers and robots replacing humans to do some jobs, the image that comes to mind is robots busy in Amazon warehouses, or robots processing customers' orders in restaurants.

But in the future, robots will be able to do more than just these simple tasks. They will also be able to handle more complex tasks. For example, the blockchain technology we will talk about next will replace the jobs of some professionals in the traditional financial system.

There is a lot of distrust in the banking system

Peter Todd recently attended a blockchain event in Toronto and explained why Wall Street is so enthusiastic about blockchain technology. First, Todd explained the problem of distrust in the existing financial system.

"The dirty secret of banks is that they don't trust their databases, and by that I mean they don't trust their employees... They don't trust each other, and there's a lot of distrust."

Todd then discussed the huge industry that has grown up around financial auditing. He said:

"If they trusted these databases and their employees, why were there so many auditors? Why was there this huge, labor-intensive audit infrastructure with so many people sitting there poring over transactions. Where did the money disappear? Who moved the money? Where did it go? Was all this legal?"

Many financial institutions are very interested in the concept of creating a new system for record keeping, replacing the current closed ledger system with a more open system similar to Bitcoin. Many believe that this open system will facilitate more efficient and transparent financial auditing activities.

The current situation is not bad, but it is not easy to improve

Todd acknowledged that financial institutions do a pretty good job of auditing their operations. He said, "In most cases, 'bank fraud' appears to be at an acceptable level."

Todd pointed out that maintaining a history of financial activity is one of the problems in increasing settlement speed. Since audits are labor-intensive and take hours to complete, reaching consensus on consistency is difficult to achieve instantly.

Can blockchain solve this problem?

Todd explained how blockchain is superior to this problem, as existing systems rely on the trust of database administrators and people who hold the keys to the system. From this perspective, a blockchain can act as a powerful audit log. Todd gave a specific example of how blockchain works:

“I worked as a bank clerk and I remember simply entering some data, and we really want a cryptographic signature that is tied to my key card or something, and then goes into the database that way. So what would it look like? Like a blockchain.”

Todd also pointed out that banks were already looking at blockchain before it gained a lot of attention. He explained:

“I think blockchain has always been something that they have in mind, so when they hear about how blockchain technology works, they think, oh, yeah. That’s what we’re looking for.”

Will blockchain eventually replace human auditors?

So will blockchain really replace human auditors? Todd said:

“I think the key point about this question is: How can we make blockchain secure enough to replace humans?”

In fact, Todd’s comments seem to coincide with what Satoshi Nakamoto said in the Bitcoin white paper. In the white paper, Nakamoto said:

“Therefore, we urgently need an electronic payment system that is based on cryptographic principles rather than credit, so that any two parties who reach an agreement can make payments directly without the involvement of a third-party intermediary.”

Going back further, cypherpunk Nick Szabo once wrote an article about this concept, pointing out that third parties are actually a security vulnerability. In addition to reducing the number of trusted parties to improve security, financial institutions can also reduce costs by replacing human labor with blockchain technology.

Original article: https://bitcoinmagazine.com/articles/blockchain-technology-could-put-bank-auditors-out-of-work-1459179559
By Kyle Torpey
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/petertodd-blockchain)