As bitcoin nears its tenth birthday, the hype around the cryptocurrency is in stark contrast to its achievements. And yet – cryptocurrencies have arrived. finews.com tallies what bitcoin has done for banks.
It was October 31 2008, when a mysterious document titled «Bitcoin: A Peer-to-Peer Electronic Cash System» by an unknown author named Satoshi Nakamoto began circulating on the internet. The coin's official birth was the following January, when Satoshi Nakamoto, whose identity remains a mystery to cryptocurrency insiders, created the first bitcoins on the blockchain.
Ten years later, retail clients in Korea are among the most frenzied buyers of bitcoin: the cryptocurrency has bestowed vast wealth on many people, and made at least a few far poorer. Bitcoin represents nothing less than the vision of an overthrow of the traditional financial system revolution – or at least a new currency and asset class.
Lagging Other Finance Tech
In nine of its ten years, bitcoin lived in the shadows, only a topic for a few technology geeks and libertarian thinkers. Last year, the token's value exploded to $20,000 – today, bitcoin trades above $5,000.
In ten years, other technical advances in finance like cash machines, Paypal, or credit cards achieved far more than bitcoin has. Not to mention smartphones, which have fundamentally altered consumer and social behavior. By contrast, bitcoin hasn't actually hit its goal of establishing a new transaction currency instead of cash.
Changing Banking
To be sure, bitcoin and other cryptocurrencies do have a foot in the door of the financial world. Bitcoin has changed banking dramatically – in ten primary ways, as tallied by finews.com:
1. Bad Bitcoin,...
As bitcoin’s price surged and veered in recent years, top bankers including J.P. Morgan boss Jamie Dimon and UBS Chairman Axel Weber were quick to slam the cryptocurrency as a scam or lacking in value. Oddly, the bitcoin hype seemed to do traditional finance, still fighting to restore its crisis-tarnished reputation, good. Should bitcoin be eventually unmasked as worthless, banks will be the last ones held responsible for telling their clients to fall for the coin hype.
2. ...But Good Blockchain
The banker's opt-repeated mantra that bitcoin isn't to be trusted was quickly followed by a resounding endorsement of blockchain technology and its promise for banking. Except that the two things are inextricably intertwined: without bitcoin as the first notable financial development based on the underlying blockchain technology, bankers would be far less interested in distributed ledgers today.
Since bitcoin's emergence, nearly every major bank is experimenting with blockchain technology – with mixed success. Most are looking for efficiency gains. Bulky and risky transactions like consortium loans, bond-trading, and issuing new stocks can be dramatically sped up with the new technology – at a fraction of the cost. In a world of eroding margins and constant panic about disruption, blockchain could be banking's savior.
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