IBS Journal December 2015


Blockchain in a nutshell


Blockchain (or distributed ledger technology – if you don’t want to acknowledge its cryptocurrency roots) is a database that maintains a stack of data nodes that are hardened against tampering through cryptographic security measures are difficult to revise or hack – even by owners of the data block. A blockchain stores a history of financial transactions, all of which are embedded securely within the system. A full blockchain can


recall every transaction ever executed in its chosen currency. Each time a new block is completed it gets added to the chain. The ability of a blockchain to quickly finalise and record data (about ten minutes on average) makes it a potential successor to ageing back office systems in markets like syndicated loans, where transactions can take up to 20 days to process. The system offers four unique benefits: • Security – A blockchain ledger is distributed among thousands of computers. Hacking is difficult if not impossible, reducing the need for expensive maintenance and security contracts.


• Transparency – The sender and recipient of every transaction are recorded and are publicly available for viewing. The way in which money flows around the system can be tracked easily.


• Privacy – All users of the blockchain are anonymous and can move money around securely and near-instantaneously. • Risk – No single company, person or authority controls the blockchain. This means that users aren’t reliant on one server main- frame. If one goes down there are hundreds to take its place and keep it running.


IBS Journal readers reveal their thoughts on blockchain


Blockchain will change the way the financial industry works, according to respondents to an IBS survey conducted throughout October. Asked whether they believed blockchain or distributed ledger technology would have a major impact, six in ten replied that it


would drastically change the industry landscape. A further 26%, one in five, said that it would have an impact, but that the impact would not be earth-shattering. 12% of those asked gave more negative responses with half of that number saying that blockchain is just a passing fad, the other


that it will have no impact whatsoever on the industry. As for when the new technology would begin to hit the mainstream, just over half responded that they expected it to do so in the


next five years. 19% of those asked opted for a longer timeline, marking the years between 2020 and 2025 as when the technology will be widespread. Just over one in five of respondents, however, replied that they believed the technology will never hit the mainstream proper. When asked what they would think if their company or bank started using blockchain, the responses were mixed. One comment


read: ‘blockchain would be encouraging when it comes to security. I don’t see how it could have any use outside of it though.’ ‘Invest in bitcoin,’ wrote another. ‘Keynesian economics is destroying the world of currency. Bitcoin is going to get better and better


over the next two to five years while [regular currency] gets worse, and collapses.’ One respondent wrote that disruptors and blockchain evangelists are premature in their enthusiasm. ‘The internet, mobile phone operators and a serious banking crash have all failed to “revolutionise” banking,’ they wrote. ‘The prem-


ise that blockchain will do is fanciful. ‘It’s also annoying to see all these “chicken little” industry pundits crying “the sky is falling”!’ they added. ‘If it solves a problem it will


be used. Sadly they don’t know banking well enough to know if it solves a problem.’ The results show that though blockchain has its vocal supporters, and that a number of people believe the technology will impact the industry in the years to come, it still has some vocal detractors.


© IBS Intelligence 2015


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analysis: blockchain


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