One of the simplest definitions of blockchain technology: "A digital technology based on a huge cloud database, through which people can perform transactions or transfer money using a network of decentralized computers spread around the world, and Blockchain is likened to a general ledger in accounting, because it's a public database in which digital information for exchanges is stored. This technology allows exchange between the two parties to the transaction without the need for an intermediary to follow the exchange movement, and the exchange process is safe because it contains lists that reveal manipulations or illegal transactions within the data records on an ongoing basis."
This technology has many characteristics, the most important of which is "decentralization" and many applications, most notably "smart contracts" in the financial field, which in turn will create many opportunities in the financial field. For example, based on decentralization, it will be possible to complete many operations such as transfers, clearing and settlement directly in a reliable and encrypted exchange from one party to another without the presence of a central clearing system, which means higher confidentiality and less or almost no time. It will also highlight the importance of smart contracts and non-fungible tokens (NFTs) by facilitating the registration and issuing certificates such as assets, shares and bonds that cannot be tampered with and can be verified. The most important thing is issuing currencies through this network. Away from the huge number of crypto currencies whose importance and clarity of projects range between currencies with strong and supported projects and currencies whose creation has no purpose except to steal traders and lure them with projects that have no reality. Sovereign bodies in countries such as the central bank can create currencies for specific purposes that can only be paid in certain markets or sectors.
On the other hand, there are many challenges awaiting banks due to the entry of these technologies into the banking arena. The banking sector with its tremendous development in providing operations starting with branches and telephone services, then internet services and smart applications, but the essence of the work hasn't changed much, and the traditional banking work is still the cornerstone, even if the papers have changed to computer screens, signatures and seals for verification codes sent via mobile. Decentralization will undoubtedly affect the current business model of banks and the way they operate, and make radical changes to the function of the financial intermediary, and there will be no need for some roles in the current system, and some departments will gradually disappear, as other departments will appear.
Therefore, we see many banks racing against time to develop new financial products and support innovation to develop new business models to achieve profits. Therefore, we saw the entry of many workers in the financial and banking sector into acquisitions or partnerships with emerging projects in the field of Blockchain.
It won't only fail to catch up with the wave, but will gradually become a "channel". Therefore, more and more industry giants are joining in investing or partnering with blockchain startups, including banks, as well as investment institutions such as Capital One and Fiserv Financial Services.
Harvard Business School
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