The press covering blockchain developments has gone full nuclear. As multinationals from banking, technology, and other industries query into the space, the press has slowly caught onto the trend. It’s almost as if the biggest corporations have started their own industry, parallel to Bitcoin, but hardly overlapping. One thing about this industry? It’s not yet produced a thing other than wild theories about what blockchain technology could do.
The excitement of blockchain has created a seemingly new industry, the blockchain industry. When you go to a Blockchain conference, you don’t see some of the well-known figures of the bitcoin world. Instead, you see banking and technology professionals.
Read More: Bitcoin Remains Block Chain’s Sole Use Case
On Google Trends, you can see that Bitcoin is still much larger a phenomenon than Blockchain is today. That despite the fact that some of the most Googlable brand names have entered the “Blockchain Rush.”
If you ask blockchain proponents, the blockchain is going to save the world. But, Citi has a more skeptical long term view of distributed ledger technology. A 48-page paper released this week by Citigroup researchers Keith Horowitz, Adrien Porter and Michael Croni dampens the recent excitement surrounding the Blockchain.
“We don’t view blockchain as an intermediate-term strategic threat to the profitable high-value cross-border payments business for the banks,” Mr. Horowitz wrote. “Large international banks are needed to transfer value across borders since currencies can only travel physically within their respective central bank system.”
The researchers add: “Central banks are likely, not willing to cede control of the money supply.” Despite this bearish view of blockchain technology’s potential effects on society by its researchers, Citi has been hard at work exploring the technology.
In 2015, Citi announced its work on distributed ledger technologies. As Kenneth Moore, head of Citigroup Innovations Lab said:
We have up and running three separate systems within Citi now that actually deploy blockchain distributed ledger technologies. They are all within the labs just now so there is no real money passing through these systems yet, they are at a pre-production level to be clear.
We also have an equivalent to bitcoin up and running, again within the labs, so we can mine what we call a ‘Citicoin’, for want of a better term. It’s in the labs, but it’s to make sure we are at the leading edge of this technology and that we can exploit the opportunities within it.
What they’re intending on doing with these experiments is probably still up for debate. Many of the blockchain projects being discussed by mainstream financial institutions are theoretical models. There are major questions and the adoption of distributed ledger technology does not necessarily mean that central banks must give up control of the money supply.
On the contrary, it could mean they have better control of the money supply, with a new transparent and open system which can be scrutinized. An evening of the playing field – that is a more transparent central money supply – could ensure economic peace and stability. At least, that’s what the blockchainers speculate.
While Citi does not foresee the blockchain displacing mainstream technology quite yet, the bank is expecting a 40%-50% decline in employees as banks move towards digital models: “Branches and associated staff costs make up about 65% of the total retail cost base of a larger bank,” said the report, which went on to note that “a lot of these costs can be removed via automation.”
What exactly will replace them has yet to be seen, but one of the more popular theories regarding how blockchain can transform business processes starts in the back office. Late last year, The Financial Times ran a piece regarding how blockchain could change back office processes.
“It’s not intended to be a currency but an efficient way to record transactions, which is ultimately what interests us,” Nicolas Granatino, of Andurance Ventures, told FT. “We haven’t allocated any capital yet, but are certainly looking into opportunities.”
Preston Byrne, chief operating officer of Eris Industries, adds: “Using blockchains to automate debt servicing and factoring, insurance, and other labour- and verification-intensive business processes is a far more interesting proposition.”
In Citi’s 48-page paper, the bank takes a tempered mood, not yet ready to celebrate blockchain technology like Santander, which estimates blockchain technology could save the industry $20 billion per year.
The views expressed in the article are solely that of the author and do not represent those of, nor should the be attributed to CCN.
Images from Shutterstock.
Last modified: June 10, 2020 2:15 PM UTC