Banks want to be high-end? They must keep up with blockchain technology

A year ago, Bitcoin was widely believed to be a tool used by drug dealers and terrorists to transfer funds of unknown origin. Now, Bitcoin has begun to enter the world financial system openly. Big banks and Wall Street investment banks have bought Bitcoin to pay for their investments.

It is the web-based blockchain technology - the ledger technology that records every bitcoin transaction and is verified and shared by the global network - that is under people's skeptical gaze.

However, the data protected by blockchain technology is not limited to Bitcoin transactions. Both parties using blockchain technology can use it to exchange other information, including stock transactions, legal documents and property records, without the need for a third party to prove it, thus saving time.

Supporters believe that this can help eliminate the cumbersome procedures brought by middlemen and can help resist corruption because the data is encrypted during the data processing between the two parties to ensure absolute security, which will not give anyone who wants to tamper with it any opportunity.

The banking industry generally believes that block chain technology can make their processing processes faster, more efficient and more transparent, thereby reducing costs.

But all of this is still in its infancy. After all, Bitcoin has only been around for six years, and blockchain technology is still in its experimental stage.

It seems that there is always a vicious circle when new technologies are born, just like when Apple released the iPad, people did not realize the problems it would solve and the impact it would have on the concept of tablet computers.

Peter Kirby, CEO of Factom, a Texas-based startup focused on blockchain technology, likens the technology to how people only used computers to send emails in the 1990s. He believes there is a lot of potential for bitcoin and blockchain technology that has yet to be tapped.

Many people think that blockchain technology is just about “transferring money back and forth”, but it is actually more than that. Its real charm lies in the fact that you can write every account into this general ledger, but in fact you will never find any trace of the account in the real ledger.

Factom is now using blockchain technology to create a permanent, secure record of land titles in Honduras, one of South America’s poorest countries, where land grabs and corruption are rife.

Every ten minutes, a bitcoin transaction is verified by thousands of computers, many of which are located in places with relatively cheap electricity, such as China and Ireland.

After verification, these data "blocks" are connected one by one to form a data "chain".

Since the final data ledger is shared by thousands of computers, if anyone tries to tamper with the data, he must tamper with the data on each computer. Therefore, this determines the immutability of block chain technology.

This also eliminates the trouble of repeated transactions previously faced by digital currencies and online payments.

“These advancements make blockchain a key innovative technology,” said the Bank of England, which has a dedicated team within the bank exploring the technology.

Last month, the Nasdaq Stock Exchange said that blockchain technology is seeking new ways to share content on the Internet. Earlier this year, Reuters also revealed that IBM is developing a digital currency and payment system based on blockchain technology.

In recent months, several major banks, including UBS, Barclays, ING, Goldman Sachs and Bank of New York Mellon, have announced plans to explore blockchain technology.

The ability to resolve transactions that would otherwise take days in just a few minutes, and the ability to virtually avoid fraud and hacking are the main reasons that attract banks to join the blockchain.

Of course, there is also the desire not to fall behind.

"We would rather destroy ourselves than be defeated by others (hackers)," said Mark Buitenhek, head of global transaction services at ING Bank.

"Our approach is ... we are just getting started now and we will see the results in a year," he said.

As banks come under increasing regulatory scrutiny, customers are most interested in whether their bank can provide an immutable record of their billions of daily transactions. For customers, this is the real factor in determining whether a bank is "high-end."

Adam Vaziri, a member of the UK Digital Currency Committee, said: "Bitcoin derivatives have unlimited potential, and block chain technology can avoid any form of record tampering."