Bitcoin: Another headache for banks

Recently, according to media investigations and reports, some people in the banking and financial services industries have shown great interest in projects related to block chain technology.

It is naive to assume that blockchain technology will have the greatest impact if it is put into use sooner rather than later. Instead, it will take a long time for it to really work.

Blockchain technology and its derivative technologies will be a great opportunity to rebuild the financial services system. It is like an impending tsunami. The biggest question is how well banks can adapt to the Internet and whether they dare to change themselves and embrace the future.

Banks’ view of the current opportunity is not comprehensive, nor as decisive as they were when it came to the Internet in 1995.

If you are a CEO or senior executive of a large bank or financial institution, you must be familiar with the birth of the Internet and its subsequent extension into the financial sector, which was probably between 1994 and 1997. At that time, at least in the first three to four years, the banking sector did not pay enough attention to the commercialization of the Internet. Take online payments as an example. Initially, banks did not accept them because they were "unsafe".

Later, online banks and online brokerages were born, and banks gradually began to provide more services and purchase brokerages online. Soon after, mobile apps were launched for consumers to use.

Long development process

Although the banking sector has begun to take the Internet seriously, it has been slow to catch on and has lacked innovation and breakthroughs. Today, when I check my online bank, I find that many features are very convenient, but also have limitations. My foreign exchange account is not linked to my bank card, so I can't transfer money online, and I can't initiate a wire transfer without going to the bank in person or having a high-end business account.

If it were me, I would definitely not choose only traditional banks, because most of the attractive services are provided by financial services companies. In addition, a large number of innovative financial technology companies have emerged in the past decade.

Here’s a classic example: In fact, $2.3 billion was spent on 126 financial technology companies over the past few years. By comparison, the global banking industry spends $200 billion a year on information technology. The financial services industry has long spent far more on technology than any other industry. However, because most of the budget is just used to keep the infrastructure running, it’s hard to see real innovation under this huge expenditure.

It is true that many banks have set up so-called innovation and research centers with budgets of millions of dollars, but this is far from enough. These are like research laboratories, where only pilots are trained and experiments are conducted. However, do they lead to real innovation?

In reality, only a few of these innovation and research centers are functional, and they are still constrained by the bank's current or even past business models. So why can't we innovate everywhere, not just in "innovation centers"?

This then led to the introduction of technical terms such as Bitcoin, cryptocurrency, blockchain technology and decentralized ledger.

Bitcoin, another headache

Regardless, Bitcoin is an online currency, so it has been in the spotlight since its inception. Later, blockchain technology emerged as the underlying support behind Bitcoin. In our view, it is like a new type of database, and it could cause serious damage to your IT department.

I have said many times before that the future development of the financial field is not just Bitcoin, nor will it stop at block chain technology. The combination of encryption technology and software engineering will be another step forward. There is no more appropriate word for it at present, so let's call it CryptoTech for the time being.

CryptoTech is not a one-way phenomenon. It is multifaceted, so it has different branches, or multiple identities. Moreover, it is not limited to Bitcoin and blockchain technology, but multiple aspects:

• Currency is not restricted by category

•Software technology has a new development structure architecture

• Distributed ledger

• The consensus clearing network acts as a “trust layer” that strictly regulates business logic, not just transactions

• Instant messaging system, built-in, faster

•Global online community

• Trading engine to review transactions and approval levels

•Computer equipment works in the global cloud

• Promote reengineering and decentralize innovation and development

The larger an organization is, the more it needs to accurately position each department.

Therefore, it is important for the banking sector to fully understand the true role of blockchain technology (including Bitcoin).