Why You’re Chained To The Bitcoin
It’s not the headline news but the news the will have the most lasting impact on your credit union’s operations that is most important to keep an eye on.
So one thing you should know this morning is that Visa, Nasdaq, Citi Ventures, Capital One, Fiserv and French telco Orange are among a group of investors to pony up $30 million to invest in Chain, one of several technology startups scrambling to adapt bitcoin-like technology to a host of financial transactions ranging from stock purchases to account transfers. This technology will transform the way all banking is done. The only question is when this transition will take place.
In its most general terms-with apologies to computer wonks out there–the bitcoin allows computer users to send a “currency” between computer users without the need for an intermediary like a credit union. I simply electronically send my bitcoin to another bitcoin user.
This is in itself is no big deal. The magic comes from the fact that every one of those transactions is recorded in a chain that acts as a public ledger of the transactions. As explained in this LA Times article each one of these transactions creates “an electronic spreadsheet” chain of transactions that, at least theoretically, can’t be edited.
The bitcoin has raised the ire of regulators because the system is ideal for facilitating anonymous transactions. A criminal who receives payment in bitcoin can rest assured that he has been paid without anyone knowing who he is. But there is nothing that says these transactions have to be secretive. The potential savings and applications that can come from a continually updated electronic ledger that can’t be tampered with has the biggest names in finance salivating particularly when it comes to high volume financial marketplaces.
For Instance Chain’s website explains how its technology can be used by brokers to sell securities directly to buyers without the use of a third-party clearinghouse. It doesn’t take too much imagination to envision a day in which the same technology is used to facilitate instantaneous clearances with a greatly reduced risk of fraud. Virtual currency or not, chain technology is here to stay.
This is the latest example of how banking and technology are merging faster than could have been anticipated even five years ago. The financial institution of tomorrow won’t just use technology it will be a technology company. Your members who have grownup expecting new IPhones every year will expect nothing less of you. Here is a link to the story.