The Digital Disruptors Are Coming - How Blockchain Is Going To Revolutionise The Finance Industry
Cryptocurrency is becoming mainstream. Blockchain based digital currencies are steadily being accepted as legitimate forms of exchange that will one day shape the future of the financial world. Organisations like JP Morgan Chase and Microsoft have already gotten on board with the Enterprise Ethereum Alliance, and it doesn’t get much more mainstream than some of the biggest corporations in the world, does it? Also a number of Central Banks are actively working in this space.
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So if you accept the fact that cryptocurrency is here to stay, what will its impact be on the finance industry as a whole? Well, it turns out it could be bigger than anyone anticipated. Whether it’s Bitcoin, Ethereum, Litecoin, Ripple or another as-yet-to-be-created currency, crypto has the potential to change the way banks and financial institutions operate and turn the finance world on its head.
To understand how this might happen, first we have to backtrack a little and look at how blockchain based cryptocurrencies function, because this is where their revolutionary potential really lies. Because everyone on the blockchain can view all transactions at all times it means that there is no need for a trusted third party - like a government or a central bank for instance - to oversee the transaction and regulate things. It also means that there’s no need for middle men to help facilitate transactions (and charge fees for doing so or slow down the transfer).
Blockchain technology also extends to other applications like smart contracts. These work essentially as ‘if-then’ statements uploaded to the network (and are theoretically tamper proof). This means that when certain conditions are met, the terms of the contract are automatically carried out. This in itself has huge implications for the legal and financial systems of the world, which are currently very complex and involve lots of oversight, regulation and enforcement.
So by now you’re probably beginning to see that this is where things get really interesting. Cutting out the middle men like governments, central banks and the legal systems - all of whom derive a the majority of their financial and political power from their roles as overseers, trusted third parties and regulators - has the potential to fundamentally alter the structure of political and financial systems as we know them.
This shift in empowerment away from big institutions and towards a more democratic, egalitarian system is no accident either. As with lots of digital disruptors, there are some more utopian motivations at work. The creator of Ethereum, Vitalik Buterin, has even gone so far as to openly say so:
“Because ultimately power is a zero sum game, and if you talk about empowering the little guy, as much as you want to couch it in flowery terminology that makes it sound fluffy and good, you are necessarily disempowering the big guy, and personally I say screw the big guy. They have enough money already.”
While making specific predictions about the future, especially when it comes to technology and finance, is a hazardous prospect that can make you look foolish in years to come, we’re pretty confident when we say that the potential of blockchain is massive. What will it change in the financial industry? Well, possibly everything as we know it.