Why financial giants are optimistic about blockchain technology: it will change everything

Near the end of the year, Wall Street giant Goldman Sachs released a report stating that the underlying technology of Bitcoin, blockchain technology, is ready to "disrupt everything." Compared with the traditional transaction system, blockchain technology will completely change the traditional payment system and be used in a large number of things including issuing securities and smart contracts, making transactions faster and cheaper.

“This decentralized cryptography-based solution removes the middleman and has the potential to redefine transactions and back-office operations across multiple industries,” Robert D. Boroujerdi, an analyst at the bank, said in the report.

Blockchain technology originated from Bitcoin and is a general ledger maintained collectively by participants in the Bitcoin network. Each participant in the blockchain network is a node, and all nodes keep a complete set of ledgers that record all historical account information. Any node that needs to initiate a transaction needs to pass the transaction information to every node in the blockchain network to ensure that the ledgers stored on all nodes can accurately update and verify the transaction. In order to encourage all nodes to provide computing power to record transactions in this blockchain network, there is a certain probability that the node will be rewarded with a new Bitcoin.

Blockchain is not like traditional financial formats, where a centralized third-party institution performs unified ledger updates and verifications. Instead, it is a technology that collectively maintains a reliable database in a decentralized and trustless manner. Bitcoin is just one application of blockchain technology.

Previously, Goldman Sachs teamed up with China's IDG Capital to invest 50 million US dollars in Bitcoin startup Circle Internet Financial. In addition, another public document shows that Goldman Sachs has developed its own "super bitcoin" for a settlement system - a digital cryptocurrency called SETL Coin, which is used to trade stocks, bonds and other assets. Although this currency is not Bitcoin, the blockchain technology behind it is exactly the same.

In addition to Goldman Sachs, other financial giants have also extended olive branches to Bitcoin and blockchain technology this year. Former JPMorgan Chase executive and "Mother of CDS" Masters became the CEO of cryptocurrency company Digital Asset Holdings. And financial industry giants including Visa, Nasdaq, and Citigroup are also pouring a lot of US dollars into blockchain technology. They previously invested in a blockchain startup Chain, involving a financing amount of US$30 million.

Last year, Oliver Bussmann, chief investment officer of Swiss bank UBS AG, said in public reports that blockchain will be the biggest disruptive force in the financial sector, and its success may have a profound impact on banks and trading companies. His bank has also set up a laboratory to study the application of blockchain technology. Industry insiders said that as banks and financial institutions deepen their understanding of blockchain technology, they may strengthen their independent development of the technology.

Mingxing Xu, CEO of Bitcoin and blockchain startup OKLink, believes that "Blockchain technology, the underlying technology of Bitcoin, is a huge technological breakthrough, similar to the TCP/IP protocol of the Internet. Although the current Bitcoin industry is only equivalent to the Internet in 1994 and is still in the infrastructure construction stage, it has the potential to revolutionize the financial industry in the next decade. The financial giants' increased investment and research and development in blockchain technology is the best proof of this. OKLink will be committed to the application of Bitcoin and blockchain technology to provide users with better financial services."