Bitcoin will be the sixth largest global reserve currency by 2030, according to research by Silicon Valley investment firm Magister Advisors, which surveyed some 30 block chain companies, the International Business Times reported. The research also indicates banks will invest $1 billion in block chain technology in the next few years and that the block chain will become the rails on which finance runs.
Block chain is “without question” the most important enterprise IT development in a decade, said Jeremy Millar, a partner in the investment firm. He characterized the block chain as being on a par with big data and machine learning. He compared the block chain to JAVA, saying that the block chain is to financial services what JAVA is to the Internet. Millar also noted that the block chain will be the “default global standard distributed ledger” for financial transactions.
The leading 100 financial institutions will pump $1 billion into block chain and bitcoin related projects in the next one to two years, the research indicated. It also found that the top banks hold portfolios with 10 to 20 bitcoin-related initiatives. These include wire transfers often complemented by the storage of “meta data” in settlement and clearing.
The block chain’s potential in finance is even greater due to its flexibility and robustness, the research indicated. Potential uses include property registries, security infrastructure and direct payments.
The top private block chain firms are currently securing “seven figure” contracts with financial institutions. Some of the initiatives have proven to be robust enough to satisfy production needs and are “near production.”
Banks will be reluctant at first to change the infrastructure that manages clearance and settlement, Millar said, but they will deploy parallel bock chain processes as a result of the growing block chain investment.
Rising acceptance of bitcoin in developing markets will result in widespread business and consumer adoption.
The main use of bitcoin in developed markets is speculation, the research noted. The lack of volatility in bitcoin and the yield in traditional classes of assets are resulting in the creation of ETF equivalents or “money market funds.” The company estimates 90 percent of bitcoin is held for speculation as opposed to commercial transactions.
At the same time, estimates indicate 90 percent of bitcoin transactions by volume are commercial ones, oftentimes in developing countries.
Futures trading volumes are triple or more the volumes on stock exchanges, Millar said, noting that it is important not to underestimate the significance of speculation by traders.
Some large wallets report that 90 percent of bitcoin transactions take place in developing markets. Major bitcoin remittance players include Abra, Atlas and Bitpesa.
With 2 million smartphones becoming active daily and with corruption a factor in developing economies, the question arises: why have a bank account?
Data from blockchain.info reports there are close to 120,000 daily bitcoin transactions, Magister Advisors notes. However, this number under-reports the total transactions since it doesn’t include 300,000 “off chain” transactions by major wallet/vault companies like Xapo, Circle and Coinbase. The number of daily transactions is closer to 1 million, according to Millar.
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