Even though blockchain is seen to have a number of useful features for banks to utilize they are finding that putting these features into practice may prove difficult.
The banking world may not trust the idea behind bitcoin, but they have realized that bitcoin’s underlying technology, the blockchain, has many valuable features that they could use, according to a Financial Times report.
The technology can’t be hacked, is transparent, and allows anyone to view and verify trades on its system.
However, while blockchain’s features were seen as the way forward at the beginning, it seems that putting these features into practice is not as easy as it sounds. This is mainly down to its transparency which doesn’t go down well with bankers who value their privacy.
Improved Efficiency within the Banking System
In today’s world, the idea behind banking is to improve efficiency, regulation and reduce costs.
Blockchain technology would help to achieve this; however, many are not too keen on a shared system across the banking sector, which could ultimately allow rival banks to spy on each other and the activities they are undertaking.
Not only that, but as the blockchain is not reversible there is the possibility that inflated trades could be seen, potentially resulting in unexpected losses.
According to Peter Randall, chief executive of Setl, a London-based company building a blockchain and distributed ledger system for financial services, said there is the possibility that too much data on the shared system from the banks could become too much.
You get something called bloat, and the more bloat you get the slower the system goes.
Blockchain, but Not as We Know It
To solve the issue, discussions are taking place to create a blockchain-like system.
So instead of sharing data with everyone involved, it has been suggested that only regulators, counterparties, and appropriate parties can view trade details.
According to the Financial Times, though, the result of the technology seems to be less radical than that imagined by bitcoin’s advocates.
Charley Cooper, managing director at R3, said to the Financial Times:
If you’re a business guy you could look at the current construct versus the new construct and say ‘aren’t you just building a big database?’
This view seems to be echoed by others who think that blockchain is simply another database equipped with enough kudos to convince bankers to work together.
Images from Shutterstock.
Last modified: March 4, 2021 4:51 PM