Blockchain Technology

Hopefully everyone has heard of blockchain by now, but if not you may want to read up on it.

Blockchain was originally created for Cryptocurrency back when Satoshi Nakamoto started up Bitcoin. Explained as briefly as possible, blockchain is

Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain. Information held on a blockchain exists as a shared — and continually reconciled — database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt. Hosted by millions of computers simultaneously, its data is accessible to anyone on the internet.

"Wu-Tang, thats all well and dandy, but I am not a computer nerd, I am a big shot finance bro! Why do I care?"

However blockchain technology is being adopted by most financial service firms.

Most firms cite opportunities to reduce friction and costs. After all, most financial intermediaries themselves rely on a dizzying, complex, and costly array of intermediaries to run their own operations. Santander, a European bank, put the potential savings at $20 billion a year. Capgemini, a consultancy, estimates that consumers could save up to $16 billion in banking and insurance fees each year through blockchain-based applications.

Personally I think the system of blockchain is amazing, and will be a major disruptor in the finance industry. Several big firms are investing heavily, and could change the way financial services firms operate internally and externally. Do you guys think blockchain is here to stay? Why or why not? Has anyone done extensive research on blockchain? What opportunities can potential college students explore within blockchain and finance? The ledger that blockchain creates seems perfect for accounting purposes... are there any issues with using that instead of bookkeeping?

Sources to educate yourself on blockchain:
1) Blockchain influencing finance
2) Blockchain for beginners

Cheers lads,

"I grew up on the crime side, the NewYork Times side, staying alive was no jive"

Wu-Tang: Something not to mess with allegedly.

 

Any investment ideas for trying to capitalize on the tremendous growth we are going to see in the use of blockchain technology? I know Microsoft and some other major tech players are starting to offer blockchain as a service, but are there any publicly traded companies whose business is more focused around something like this?

https://azure.microsoft.com/en-us/solutions/blockchain/

 

Will be interesting to see how banks utilize blockchain for sure. Also notable that GS is the only bank that does not currently have any job listings that include the title "Blockchain" while others like JPM do (source is CB Insights which created a graph of all GS job listings by category).

I also think if someone can establish themselves as an expert of sorts within the Blockchain industry it will be very lucrative career path, but am also open to people challenging this as it's obviously tough to predict.

 

another good source: https://hbr.org/video/5582134272001/whiteboard-session-how-does-blockch…

I'm still a bit at a loss. I see the benefit of a private blockchain for internal bookkeeping, much like the cloud is more efficient than file cabinets, but I do not quite understand why this information ought to be public.

right now it seems like people are talking about it a lot like the underpants gnomes from south park, I cannot quite wrap my head around how it might be useful, specific examples that will save money, not just postulation "blockchain will revolutionize XYZ"

am I alone here?

 

but see, that's a vague answer. increasing transparency and trust...in what?

I'm thinking if I'm a publicly traded company, and I have all of my transactions recorded on a public ledger, well that's awful from an investment standpoint, because it makes our investors more short term minded than they already are with quarterly earnings calls.

if I'm a customer of a bank, I don't want my transactions on the blockchain, it's my money and my business, why the fuck would I want that stuff to be transparent?

maybe I'm not getting this...I hate to write off a technology because I think that most new technologies with this much hype have some application, I just have a hard time with this one. someone please tell me where this will be useful, specifically.

 
Best Response

When you think of blockchain, think disintermediation.

The novelty of blockchain is consensus algorithms. For Bitcoin, this algorithm is called "Proof of Work". These algorithms allow entities which participate in a business network (e.g. banks, healthcare payers / providers) to adjudicate transactions based on agreed upon, deterministic logic (i.e. code) in an autonomous environment.

Since we're on a finance forum, I'll use a banking example. DTCC is a clearing house for securities that are exchanged. They charge for their clearing house services, like providing post-trade services to make sure assets are exchanged from Registered Party A to Registered Party B.

Banks and Exchanges use DTCC because they'd like to because they'd like to off-load the post-trade work flows, the adjudication of transactions and the risk associated with owning this process. But what if Banks and Exchanges were fed up with DTCC's monopoly on clearing house fees, and they decided to set up a blockchain network to carry out all work-flows and adjudication that DTCC once did? They would take all processes required to clear securities from Registered Party A to Registered Party B, write them as "chain code", agree upon a consensus algorithm that ensures that business will be conducted in good faith and execute this decentralized transaction network where you would only pay for the I/O of transactions as opposed to what DTCC was charging you to be the trusted-middle man / clearing house.

DTCC saw this coming and they have partnered with IBM and a few start-ups as they prepare to cannibalize their existing transaction network, with a blockchain network that boasts increased:

  1. Security and indelibility
  2. Sustainability with no single point of failure / attack
  3. Transparent logic with auditability of transactions guaranteed by hashes & pointers
  4. Operational cost efficiency
  5. Regulatory compliance (e.g. build BASEL III requirements into the transaction logic).
 

Hi surferdude867, just trying to help:

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Calling relevant pros to the rescue! @yakko1zzz" idaho Dean-Rivera1

I hope those threads give you a bit more insight.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

they are different coins with different uses. you might be able to say one is more useful from a transaction perspective, but you can't say one is wholly more useful than the other. bitcoin is digital gold, it's where people are going to be storing value, and it has the brand behind it, the first-mover advantage, the strong security, etc.

 

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