(Courtesy of Jacksonville Business Journal)
Blockchain is a game-changer for professionals in financial services. Ignoring it would be like clinging tenaciously to your abacus in the face of computers armed with electronic spreadsheets in the early ’80s.
This smart, decentralized, trusted and highly-encrypted network is already changing the face of business for financial professionals. Now is the time to embrace and study blockchain.
Blockchain is the underlying base for cryptocurrencies like Bitcoin, Dash, Ethereum and many others. Each transaction (e.g., Betty agrees to buy 10 widgets from Mary for X Bitcoins) is stored in a block. The completed transaction block of information is put into the chain of all other transactions. It must be in complete alignment with all other transactions. Hence the term blockchain.
Blockchain and Cybersecurity
Blockchain also involves cybersecurity, which is big and getting bigger. As we become more concerned about threats, blockchain networks are a great tool for security professionals. Technologies built around a blockchain provide much greater security than legacy systems because their structure is immutable. It can’t be changed. Another advantage is that there is no single point of failure in a decentralized system.
When we see the attacks that have happened at well-regarded and carefully watched corporations like Home Depot, Target, and even the Pentagon and other U.S. government databases, we should be concerned. When you have centralized control, it creates what cybersecurity experts call a honeypot — a target enriched with a lot of accounts. If you break into one computer system, you get the information on that one system. If they break into a computer system that contains thousands, even millions, of records, the bad guys have hit the jackpot, or the honeypot.
It would not be a stretch to think that if the bad guys can attack institutions that:
- Have very smart people working for them in the area of cybersecurity
- Take extra steps to protect the financial records and assets of their customers
…then perhaps just blindly trusting these legacy institutions to take care of our data might not be enough.
A mathematically-controlled system
Many would rather trust a decentralized, mathematically-controlled, algorithm whose accuracy is verified by thousands of computers constantly. The old-style system of command and control can’t match the power of decentralized blockchain technology.
Blockchain is using technology and mathematics rather than paper and a (hopefully) trusted third party. This reduces costs dramatically (less human interaction, thus less payments), improves the speed (think email vs. a paper letter sent through the mail), and increases trust (the transaction must be verifiable by all blocks on the blockchain).
Yes, blockchain is a revolution in the way we buy and sell goods and services as well as how we store records. The possibilities are enormous, and we only have a slight inkling of the potential. Think about where we were with microcomputers in the mid- to late-1970s — microcomputers: such a quaint term! — vs. where we are today with smartphones and tablets. They had no idea that we’d have vivid 4K video resolution, video communication for free around the planet, pictures taken by a phone, banking done on our phone, and the ability to book rides, hotels and order groceries digitally — all while loving it!
Think about what we can do now with cryptocurrencies like Dash and Bitcoin Cash (BTH). You can pay for goods and services in person or over video like Zoom or Skype by holding your smartphone to the screen and flashing some code. You do this without worrying that you might have your credit card denied. You are not running up your credit card balance higher using cryptocurrencies. The merchant pays a much lower fee than with credit card processing and there are no chargebacks. Everyone wins.
A massive change ahead
This is the way not only of the future, but also of forward-minded financial professionals. We are in the early phases of this massive change. Now is the time to educate yourself on what is happening. Sites like bitcoin.com, cointelegraph.com and coindesk.com are good starting places to learn about this world bursting with opportunities.
Blockchain is well-known for what can be done with cryptocurrencies. Bitcoin, the most popular of the several hundred cryptocurrencies recognized today, recently underwent a major change called a “fork,” which separated the legacy Bitcoin (BTC) from the newly established coin called Bitcoin Cash (BTH). This split allows for faster and cheaper transactions with BTH while preserving the existing investments in BTC.
Countries around the world are embracing blockchain as a viable system for managing and streamlining financial transactions. Smart financial professionals are embracing blockchain technology now to access the benefits today, and discovering new opportunities for tomorrow. Don’t cling to your abacus in the face of new technological possibilities.