Blockchain holds the "single version of the truth" which makes it useful in banking, and businesses alike, says Synechron advisor Tim Coates.
In 2018, and beyond, the blockchain will become one of the largest focal points for digital transformation. TechRepublic's Dan Patterson met with Tim Coates, advisor at Synechron, to discuss how financial service providers use blockchain technology.
Since the blockchain is a distributed ledger technology that allows nontrusting counterparties to trust each other, it's useful because "banks and so many other industries have this business model where they hold their own version of the truth," Coates said. "Often the best way to get around that is to trust someone in the middle to hold that single version of the truth."
Blockchain could create different business models in banking and improve the accuracy of data and reduce costs, he said.
SEE: Quick glossary: Blockchain (Tech Pro Research)
One of the challenges banks face in trying to implement this new type of technology is cohabiting the new systems with the old. Though these old systems aren't broken, they have been around for decades and it can be difficult to make a business case to transition into new technology, Coates said.
A lot of the current blockchain platforms spend a lot of time thinking about how to coexist with the systems that are already in place, so there can be an interim point. "The nirvana vision is that the whole financial system is run on distributed ledger technology," he said. "I think in the next couple years, it's going to be more around 'How can we coexist so we're not asking banks to rip everything up?'" he said.
For now, there is a lot of IT security challenges around this technology, as well as concerns involving cost and understanding blockchain itself.
- Cheat sheet: Blockchain (TechRepublic)
- Why blockchain is essential to the future of banking and finance (TechRepublic)
- Top 5: Business uses for blockchain (TechRepublic)
- How blockchain will shape up in the enterprise in 2018(ZDNet)
- Mastercard opens access to its blockchain tech (ZDNet)