The Rise of Blockchain and Cryptocurrency

Blockchain technology seems to be the buzzword of this day and age. During his presentation, Dr. Jeff Welser (VP and Lab Director at IBM Research) briefly mentioned “Block chain as an emerging platform for transaction services that will fundamentally change the world of financial services” This got me really curious about the core features of this technology, how it operates and how will it impact the future of financial services.

To put in simple words, Blockchain is a technology for a new generation of transactional applications that establishes trust, accountability and transparency while streamlining business processes. Think of it as an operating system for interactions. It has the potential to vastly reduce the cost and complexity of getting things done. [Source: IBM Developer Center] The technology operates on 5 key fundamental concepts:

1. Decentralized Consensus – All related parties agree to network verified transactions
2. Smart Contracts – computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract
3. Advanced Computing – Combination of all the key concepts enables computers to communicate and trust one another at a deep level
4. Shared Ledger – Append-only distributed system of record shared across business network
5. Transaction Distribution – There is a standard network protocol that allows every participating node to receive every transaction and apply the same validation rules

These have helped create this innovative platform that has the potential to modernize the post-trade ecosystem. Not only is the technology promising but it also holds some key benefits such as reduction of time, costs, risk and enabling new business models.

 

Cryptocurrency

One of ways blockchain is being used are for “virtual currencies” primarily called Cryptocurrencies. It is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency [Source: Wikipedia]  It is said that the payment systems are still like emails were back in 80’s and this technology is looking really promising in changing the system and making it modern. Thus, making it a good investment at this point in time.

Cash is being used less and less while other methods of payments such as currencies are gaining in popularity. There are approximately 600 cryptocurrencies in the market today with the leaders being Bitcoin, Ethereum and Ripple. Every cryptocurrency differs in some aspect to the others.  Not only are cryptocurrencies highly profitable to invest in but they are also easy to make transactions with.  As a matter of fact, If you bought $100 of bitcoin 7 years ago, you’d be sitting on $75 million – $95 million now [Source: CNBC] This high profitability in investment is seen to be one of the factors driving the popularity of cryptocurrencies which in turn has also brough the spotlight on the blockchain technology.

 

The future

 

That being said the future seems bright for blockchain and virtual currencies. We can possibly see a change in way payments are handled and how transactions are completed with some of these changes already slowly taking place. Some currencies like Bitcoin and Ethereum are still expected to rise 5-10 times of their current value by 2022. As Dr. Jeff Welser also said during class, blockchain is really promising.

 

 

References:

https://medium.com/@jimmysong/why-bitcoin-is-different-than-other-cryptocurrencies-e16b17d48b94

http://www.huffingtonpost.com/entry/what-is-the-future-of-cryptocurrency_us_58cfd53ae4b0537abd9572bd

https://www.pwc.com/us/en/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html

http://www.oodlestechnologies.com/blogs/The-Blockchain-and-Decentralized-Consensus

https://medium.com/@nowsourcing/the-rise-of-bitcoin-blockchain-and-cryptocurrency-55d900a3a372

https://www.intelligenthq.com/innovation-management/blockchain-5-key-concepts/

http://www.dtcc.com/news/2016/february/17/eight-key-features-of-blockchain-and-distributed-ledgers-explained

 

 

 

 

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