WHY BANKS ARE JUMPING ON THE BLOCKCHAIN REACTION
What a mess our global financial system is: $230 trillion of global debt. Imploding currencies all over the world, whether it’s the Brazilian Real, Russian Rouble, Venezuelan Bolivar etc. Money printing and devaluing of currencies by central banks on a scale unimaginable ten years ago... the list goes on.
While a tiny minority has become obscenely wealthy, billions of people are struggling to survive, all due to a system that was poorly designed and has not evolved to meet modern needs. What’s more, most of those people don’t even have access to some of the financial services that we often take for granted, such as online banking, credit, and ATMs.
So what would a financial system look like that truly functions for the underbanked or unbanked in any country? A system that empowers people to have complete control over their finances without any third party interfering? A currency that can’t be devalued at the whim of politicians or central bankers? An honest, transparent system that has equal opportunities for everyone?
Imagine owning money that you could use anywhere in the world without the hassle or costs of foreign exchange rates. Imagine not even having paper currency anymore, and doing away with ridiculous fees like the ones you get for withdrawing cash from an ATM. In this new system, not only would you be able to safely store your money, but you could also send any amount to any individual or business anywhere in the world, instantly and nearly free of charge.
Imagine a world where everyone has the opportunity to be part of this egalitarian financial system. Not only can they be part of it, they can leverage it for their own benefit. Poorly educated people in emerging countries could make money online in completely new ways. Whether it is creating original content for educational or entertainment purposes (videos of music, cooking, dancing) or carrying out tasks for others, they would have access to a global audience that could tip them any amount – large or small – with one click and no added expense.
That system is being developed right now and it’s called Bitcoin. Of course it already exists to a certain extent - but it still has a long way to go before it becomes a stable, scalable global currency system that’s user-friendly. We also need the internet to keep spreading to the remotest parts of the globe, although bitcoin will probably be able to function in the future without internet.
I’m not suggesting that bitcoin will replace our existing system – although who knows – but rather it could be a radically alternative financial system to the deeply flawed one we have. It has been a rough ride for bitcoin until now, a new emerging technology that has mainly received mainstream media coverage for being ‘dodgy’, used by criminals and drug smugglers. The irony of course is that the scale of criminality in our existing financial system dwarfs anything that bitcoin has instigated.
The technology behind bitcoin – The Blockchain – is extraordinary, the vision for what it could become was genius. Now there are new versions of that technology known as ‘blockchain technologies’ that are being studied and adopted by major financial institutions globally, as they grapple with this new disruptive phenomenon that threatens to pull the rug from beneath their feet. The media has jumped on the blockchain bandwagon too: “no need for bitcoin, it’s all about blockchain technology”.
It’s certainly true that these new bitcoin-free versions of the blockchain could help banks become more efficient and save costs. Slowly but surely, banks are starting to realize and embrace the potential of blockchain for financial services. As recently as last month, the first international blockchain payment was sent from a Canadian bank to a financial institution in Germany.
But that’s not even the most exciting part. As the world leans more and more towards a peer-to-peer economy – think Airbnb, Uber, Lending Club – it makes perfect sense to have an alternative peer-to-peer financial system that empowers everyone, rather then just a few.
At Zinc, we are excited by the possibilities of improving the world that technology brings. Sometimes those are small everyday experiences, like managing your money in a smarter way, and other times those can be game changers, like re-imaging the entire global financial system. Bitcoin has the game-changing potential to do the latter, but one of the essential requirements for its maturity and adoption will be to design genuinely user-friendly products and services.
It’s time to for banks to put aside their prejudices about bitcoin. It’s not 100% there yet, and of course may never fulfill its potential, but there is cause for optimism. Ten years from now, it could be a financial system that is about as perfect as we can conceive.
Will bitcoin solve all the world’s problems? No, but at the very least, it could be a fairer, and more honestly transparent system than the one we have now.
And that’s got to be worth pursuing.
Founder, Zinc Design & Innovation
EDITOR'S NOTE: This article has been reproduced with kind permission from the author. Some minor changes have been made to reflect style considerations. Read the original piece here.