Blockchain is a technology that has a rapidly expanding range of possible applications, with experiments underway in a number of disciplines, from patient records to online voting.
Undoubtedly it’s most developed application however is in finance, with Bitcoin and other blockchain based technologies relatively well developed, and a number of big banks are jumping into the space with gusto.
For instance, last year Goldman Sachs filed a patent for SETLcoin, a cryptographic technology to help with trading and clearing transactions to round off what Nasdaq had called the ‘year of the blockchain’.
SETLcoin is designed to facilitate an exchange of assets, whilst the technology would also support transactions between virtual wallets, and indeed non-virtual wallets, all via the same peer-to-peer network.
GoldmanSachs aren’t alone in pursuing this however, with Santander, UBS, BNY Mellon and Deutsche Bank hoping to launch their own blockchain systems by 2018 in partnership with the blockchain startup Clearmatics.
Their system should allow institutions to pay for securities, whether bonds or equities, without first needing the traditional money transfer to be completed. Instead, the system would utilize digital coins that would then be convertible into cash via central banks.
The approach would save considerable time and money in the post-trade clearing and settlement process.
It should come as no surprise that the banks are heading down this path, as each are part of R3, which is a consortium exploring distributed ledger technologies.
A shifting landscape
Whilst this may highlight the growing role of blockchain technologies in the finance industry however, it may herald less positive times for Bitcoin itself.
We have to remember that Bitcoin was created in the embers of the global financial crisis and was presented as a new and less corrupt way for finance to be run that didn’t involve the discredited institutions that had led the global economy into meltdown.
Whilst a number of security mishaps have hampered its attempts to ever deliver on that potential, it did nonetheless attract the attention of the big beasts to blockchain itself, and more particularly the potential for them to create their own network in lieu of Bitcoin.
Whether it’s developments such as Goldman Sach’s patent or news from R3, most major cryptocurrency developments in the finance industry today do so without mentioning Bitcoin at all.
As such, it seems likely that Bitcoin will join the long list of companies and technologies that were early movers but didn’t manage to dominate their niche.