Blockchain and Bitcoin: What the Future Holds for Indian Banks
The Digital Mesh is a human-centered theme, a continuously evolving ocean where everything is interconnected because of the expanding purview of digital devices that are connected.
I liken Bitcoin to email. In 1995, I got my first email address, Hotmail actually. At the time, I was 16 and recall someone scoffing during a heated discussion of email surpassing snail mail. Fast forward to less than a decade, and email had become the preferred medium of communication and there is an entire generation that has never licked a stamp. So to dismiss Bitcoin would be a similar blunder on perhaps an even larger scale.
The Digital Mesh is a human-centered theme, a continuously evolving ocean where everything is interconnected because of the expanding purview of digital devices that are connected. For instance, at one point your watch was a standalone object telling you the time. Now, it is connected to a sea of information that could tell someone else the time as well as where you are at.
One can look at it as a collection of devices, wearable or traditional computing devices, transportation devices like even the computers in your car, information, apps, services, and even businesses, all dynamic. And into this mess comes a currency that can navigate this ocean without the need for currency exchange.
A global interconnected world like the digital world would no doubt have its own way to trade because traditional options are just much too cumbersome. Bitcoin is a virtual global currency, which helps you exchange value that is tracked in a public ledger and traded online using P2P platforms like Blockchain. People can exchange Bitcoin without intermediaries, which leads to greater control of funds and lower fees. A blockchain is a public ledger of all Bitcoin transactions that have ever been executed; it is the technology underpinning the bitcoin digital currency. A blockchain is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. Cryptography allows each participant on the network to manipulate the ledger in a secure way without the need for a central authority, thereby creating an open network. Once a block of data is recorded on the blockchain ledger, it is extremely difficult to change or remove.
Banks are treating blockchain very seriously. Blockchain is the distributed database technology behind bitcoin. The technology is used for financial asset transactions. It does not do anything fundamentally different for the user, but the infrastructure could cut $20bn+ off costs and because it is a digitally encrypted distributed ledger, its capability of being truly real time has far reaching consequences. The transaction database is shared by all nodes using the same protocol. Data is stored publicly, viewed using private key
The Security and authority are decentralised. What is the impact of Bitcoin and Blockchain on traditional banking? Well, Bitcoin eliminates intermediaries and forces banks to innovate and is key to the current culture that is moving towards paperless transactions. But banks are aware of its potential to disrupt the ability of central banks to exert control over the economy and issue money because Bitcoin is not regulated, mainly because it is quite hard to regulate. That also makes it very popular for money laundering. The current system of banking and currency exchange involves a central electronic ledger that oversees all banking transactions. Blockchain is the opposite.
The current system of banking and currency exchange involves a central electronic ledger that oversees all banking transactions. Blockchain is the opposite. It is a decentralised open network that anyone can access, which is transparent and run by its participants, a more democratic way of exchanging money that its proponents say make finance more accessible. Because it is not regulated, works on consensus, is practically real time and enables third party transactions to be as seamless as internal ones, this means costs are cut drastically, accounts are updated faster, and dispute resolution is easier. Banks would like you to believe that blockchain technology will impact you only twenty years from now because they don’t want to spend the money that will require them to change the way they look at their own value chain, which will be drastically impacted when Blockchain technology breaks out of the primary digital space and spills over into the real world.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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