Financial giants are pouring money into a technology called blockchain

Financial industry giants including Visa, Nasdaq, and Citigroup are pouring money into a technology called blockchain, which not only created Bitcoin, but is also expected to overturn the existing financial market and usher in a new era of "decentralization."

For players in the financial ecosystem, such as banks, securities firms, clearing centers, and trading centers, blockchain technology will fundamentally transform their existing business models.

Industry insiders believe that if this technology can be widely used in the financial industry, the settlement time, transaction costs and counterparty risks of financial transactions will be greatly reduced.

Today, blockchain technology has attracted a large number of talents, including the CDS Queen of Wall Street, and may "change everything."

Blockchain

Blockchain is the underlying technology of Bitcoin, which refers to a string of data blocks generated by cryptographic methods. Each data block contains information about all Bitcoin network transactions in the past ten minutes, which is used to verify the validity of the information (anti-counterfeiting) and generate the next block.

Compared with traditional technologies, blockchain represents a new decentralized system based on P2P. As Jon Evans, a columnist for the technology website TechCrunch, said:

The blockchain on which Bitcoin is based is a new decentralized protocol system that can securely store transactions or other data without the need for any centralized authority to review them, as they are verified by the entire network. Those transactions are not necessarily financial transactions, and the data is not necessarily currency. Blockchain technology can be used in many applications….”

Furthermore, in today's network structure, there is a centralized institution (such as an exchange or clearing house) as a data processing center. However, blockchain technology provides a decentralized distributed cloud network that is interconnected by resolving the trust problem between network nodes. Each transaction is jointly verified by these nodes, without the need for intermediaries such as banks and exchanges. IBM elaborated on this:

A centralized data center collects information from all connected devices, but this has serious drawbacks in terms of lifecycle costs and revenue. IBM believes that in order to solve this problem, each device must be able to manage itself, so that there is no need for frequent manual maintenance. This means that the operating environment of the devices should be decentralized and they should be connected to each other to form a distributed cloud network.

This model is sustainable - as long as the device exists, the life cycle of the entire network can become very long, and the operating cost can be significantly reduced. To build such a distributed cloud network, the node trust problem must be solved - in traditional centralized systems, trust mechanisms are relatively easy to establish, after all, there is a central agency to manage the identities of all devices and nodes. But for the potential number of connected devices in the tens of billions, this is almost impossible to do. IBM believes that Satoshi Nakamoto's Bitcoin blockchain technology can perfectly solve this problem: "The core of the solution is blockchain technology, which is the underlying technology of Bitcoin."

Blockchain technology solves the long-known Byzantine Generals' Problem - it provides a way to create a consensus network without trusting a single node. Bitcoin uses algorithmic engineering to ensure the security of the entire network, and with it, devices can be completely independent of any human intervention in the financial market. An algorithm will generate its own Bitcoin wallet, allowing it to trade with other algorithms (other wallets).

Luo Jinhai, founder of Bitcoin payment company ColaPay, is full of expectations for the future of blockchain technology:

“The blockchain technology, the credit foundation of Bitcoin, is a huge technological breakthrough. It has revolutionized the Internet and the financial industry. The current Bitcoin industry is just like the Internet around 1994, which is still in the basic proposal stage. But in the next ten years, blockchain may replace the Internet.”

CDS Queen

Nothing is more convincing than the Queen of CDS turning to blockchain technology.

Blythe Masters, once the "number one lady" in commodity trading on Wall Street, became a managing director (MD) at the age of 28, setting a record as the youngest female executive in the history of JPMorgan Chase.

Masters has held a number of senior executive positions at JPMorgan, including as chief financial officer, and has run the physical commodities division since 2007.

As the mother of "CDS", the market size of financial derivatives she conceived once grew to as high as 58 trillion US dollars and is believed to have contributed to the 2008 financial crisis.

In 2014, JPMorgan Chase's commodities business surpassed all competitors and became the top spot on Wall Street. But in the same year, JPMorgan Chase sold the department for $3.5 billion due to regulatory pressure. Masters then announced his resignation.

After a year of silence, she made a comeback and became the CEO of cryptocurrency company Digital Asset Holdings (DAH).

DAH was co-founded by Sunil Hirani, founder and CEO of swap exchange trueEX, and Don Wilson, founder and CEO of proprietary trading firm DRW Trading. Its goal is to become a financial asset trading venue that facilitates investors to convert traditional currencies and Bitcoin at a lower price cost and time cost.

Blythe Masters is currently leading DAH in developing a securities and funds transfer system based on a blockchain system.

Today, Masters is as high-profile as ever. Not only has she warned the United States that it may fall behind in the blockchain race, but she has also vowed to the banking industry that blockchain will change everything.

“You should take this technology seriously,” she said. “It’s like the Internet in the early 1990s. It means wealth is waiting for you.”

Beachhead layout

Capital always has a keen sense of smell, especially on Wall Street where many "smart people" gather.

Masters is not the only one who smells an opportunity. Bigwigs in the U.S. financial industry have already begun waving their checkbooks to grab the blockchain, a gold mine that brings endless imagination.

According to the Financial Times, Visa, Nasdaq and Citi Ventures recently invested in a San Francisco blockchain startup Chain, involving a financing amount of US$30 million.

Wall Street News has mentioned earlier that Nasdaq OMX Group Inc is testing blockchain technology. This technology has the potential to subvert traditional financial transactions into a Bitcoin-like transaction method. If successful, Nasdaq Group hopes to apply the so-called blockchain technology to the stock market.

Oliver Bussmann, chief investment officer of Swiss bank UBS AG, said last year that blockchain will be the biggest disruptive force in the financial sector, meaning its success could have a profound impact on banks, trading companies, etc. His bank has also set up a laboratory to study the application of blockchain technology.

Bob Wigley, former head of Europe, the Middle East and Africa at Merrill Lynch, recently praised the cost-reducing advantages of blockchain technology and said he had invested in a British blockchain technology company.