From the deep, dark recession following the banking crisis in 2008 grew Bitcoin – a cryptocurrency created in an anti-establishment context.
And along with it came something called Blockchain, a radical and reportedly more efficient way of keeping a recorded history of transactions.
In recent years, with the rise of fintech, the establishment began taking notice and concerns developed that Blockchain could disrupt and impact the banking system if it became more widely used.
But with its rise in popularity comes a need for the general public to understand what it is.
So we asked Nick Williamson, founder of Credits, which has offices at Canary Wharf’s Level39, to explain what it is.
What is Blockchain?
“I think the term distributed ledger is more apt and gets down to the root of the benefit and how it actually works. When you boil it down to its simplest elements, what you’re basically trying to do is create an audit trail of a bunch of statements that people have signed and that’s it.
“So Blockchain is an audit trail of signed statements that are put forth in a particular order and on top of that you can build financial infrastructure, cryptocurrencies and identity management.
“You are basically making a never-ending record of statements. Once they are made they can never be revoked or lied about after the fact.
“A lot of this gets complicated because it came out of cryptocurrency. Bitcoin, everything that Bitcoin was, that it was ever supposed to be and all the cryptographic dark magic got thrown into one big category and everyone tried to explain all of it at once.”
Why is it called Blockchain?
“It’s called a Blockchain because you have a chain of blocks. You start with an initial state of the world that’s often called the genesis block.
“That block is the starting state before anything takes place and from there you apply transactions that may or may not be financial in nature.
“If you had to confirm each transaction individually it would take too long, so we bundle them up into blocks which is just literally a long list of transactions.
“Because each block follows a previous block it’s literally a chain of blocks that make up a shared history over time.”
What does it mean for the banking industry?
“It has been an opinion among the cryptocurrency crowd that Blockchain could replace the banks. We do think it will have some impact on the banking system, we just don’t think it’s going to be the first industry that’s impacted hugely.
“It could be something that lessens the power and monopoly or oligopoly that exists today. But it could also lead to a series of tools that reduce fraud or operational costs, therefore increasing the market power of existing industries.
“What we’re seeing in financial uses is they are often cannibalistic to existing revenue streams. That’s why we’re focussing on the non-financial where we are targeting operational efficiency or the removal of fraud.
“It’s less contentious and more obvious where the potential immediate value will be and it avoids a lot of the chicken and egg situations you have in the financial sector.”
What about the future of Blockchain?
“I think it’s going to end up being agnostic horizontal era technology that’s good for some things and bad for others.
“It takes a little bit more computational time and a little bit of fiddling but it gives you cryptographic integrity of the data, identity, better security for authentication and if you use it right it gives you better capacity for managing backups.
“As we got a better feel for what the tech was good at and we started looking at it, we saw there were a fraction of use cases where it doesn’t look applicable initially but then it becomes meaningful.
“We’ve seen it in spades in areas we didn’t see as viable even a year ago before we started throwing the technology at the wall to see what stuck.”
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