At last year’s Milken Institute Global Conference, an annual event that attracts some of the world’s most extraordinary people to explore solutions to today’s most pressing challenges, a group of experts gathered for a discussion on the future of blockchain. Brian Forde, who is now a senior lecturer at the MIT Sloan School of Management, opened up the session with an overview of the new technology.
To explain blockchain in layman’s terms, Mr. Forde provided several examples as a comparison. He said that when you send an email to someone, you don’t ask what phone they’re using or what email provider they have. Instead, the only information you need from that person is their email address. And, once you send that person an email, they receive it almost instantly. It’s also free.
However, if you want to send someone $20, you would likely play a game of 20 questions. You might ask them if they are on PayPal or Venmo. You may ask for their first and last names, bank name, routing number, or account number. Once you send them money, it could take several days for them to receive it. Plus, there could be a fee associated with it.
With blockchain, and in particular cryptocurrency (e.g., Bitcoin), which leverages blockchain, you can send money back and forth seamlessly. It doesn’t matter which application you use. Since blockchain is open and interoperable, the amount of friction is reduced and the number of transactions increases exponentially. A decentralized, public ledger that a corporation doesn’t own is simply very powerful.
Although the scalability of and regulations for blockchain aren’t well understood, the speed and cost savings it can create are tremendous. An IBM report published in August, 2016 indicates that 15% of the 200 global banks surveyed are expected to implement blockchain technology by the end of 2017. Another report mentions that 90% of the major banks in the U.S., Canada, and Europe are seriously exploring blockchain for payments.
Whether it’s for payments, smart contracts, securities clearing and settlement, asset management, insurance, or compliance, in 2017 we’ll begin to see more comprehensive and concrete examples of how blockchain is and can be used in financial services.
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