There is no doubt that the computerization of banks in the 1960s transformed the industry at the time. The way financial transactions were made changed completely, but bank processes themselves, not so much. Can we imagine a technology that provokes a revolution equivalent to the Internet revolution? This is one of the promises of a technology called Blockchain.

Blockchain technology emerged in 2008 as the architecture that enabled the creation of the virtual currency Bitcoin, used by more than 6 million people today. In recent years the use of this technology has been discussed far beyond Bitcoin. In particular the discussion has centered around the advantages of using a transaction-distributed database called a ledger, in which each user has a copy of the ledger shared by its network users.

The transaction liquidation system that exists today is the same that has existed for many years. Financial institutions have created sophisticated digital payment systems, but that structure has not changed much. The main feature of these systems is the requirement for a central entity responsible for maintaining transactional data in an accurate and accessible manner.

Blockchain and payment systems

In a payment system created using Blockchain technology, transaction liquidation is carried out directly between the user and the recipient so that there is no need for a central entity intermediating the transaction.

The same technology that enabled Bitcoin to conduct transactions between entities using encryption and the power of collaboration on the internet has the potential to revolutionize many industries beyond the financial one, and transform the world and the digital economy.

With a ledger distributed virtually, anything that has value can be tracked and marketed. Diamonds can be marked directly from extraction in mines with a cryptographic key that is checked and tracked in all links of the chain. If a copy is made and inserted into another diamond, the transaction will not be accepted in the ledger because each record contains all past transactions.

Blockchain and the music industry

Let’s imagine using this technology in the music industry as another example. A musician could release a song automatically after a transaction with the user is completed. This would reduce piracy, as the music can be encrypted with a key that belongs to the author along with the end user. If this same song was copied and another user tried to play it, the file could not be accessed because the keys for the user and music would be invalid.

Blockchain and exportation of goods

Another application could be in the exporting of goods. Today, exporters deliver goods to a port and then the ship’s captain acknowledges receipt of the goods and signs the “bill of loading.” The importer, upon receipt of the goods, confirms the receipt to the bank that finally makes the payment to the exporter. Each step in this process is performed using paper documents signed and verified several times. What happens if in the middle of this long process one of these institutions become insolvent?

Blockchain is the technology behind a new generation of transactional applications in which the consistency and reliability of transactions are guaranteed by your network, allowing transactions to be carried out between individuals directly.

Today, every time we use a credit or debit card, there is a person responsible for capturing and liquidating the transaction. With the adoption of Blockchain, we can imagine that the future of the financial industry could undergo a major transformation.

By Anibal Strianese, IBM.

Click here to learn more about BlockChain:
http://www.ibm.com/blockchain/

Original link:
https://www.ibm.com/blogs/systems/blockchain-next-revolution/

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