Why Blockchain Is Changing Banking

It seems that China is going to have a digital currency based on blockchain. And that’s huge, but I’ll comment on another aspect — how blockchain made this possible.

The more tech- and cryptography-savvy will rightly note that it was perfectly possible to do a multi-organizational ledger with cryptographic guarantees long before bitcoin and the blockchain data structure that it made popular.

However, the popular (and hyped) concepts of blockchain are easy to understand by people other than those with niche expertise in distributed systems and cryptography. A shared, immutable ledger is understandable and people want to apply it to everything.

In practice it’s not trivial at all and you can’t apply it to too many things, but the important part is that people now get what is possible. Including bankers and more forward-looking policy makers.

At the same time, the same bankers, probably started fearing that if that blockchain thing is really as good as it sounds, they will be replaced eventually, so they have to jump on that train.

And that leads to discussing and building (central)-bank run multi-organizational, cryptographically secured ledgers. Not that these permissioned blockchains weren’t possible 10 years ago. But they are understandable and relatable now, thanks to the popularity of the blockchain buzzword. And that human factor is going to lead to change.

It is often not technology itself, but the perception of technology that brings the actual change in the way people think. In a way, a web search engine is an innovation because it changed the way people think about access to information. Blockchain changed the way people think about trust in distributed systems. And that’s why it’s changing banking.