BLOCKCHAIN?

What you need to know.

“Organizations that fail to act will potentially lose their core business to competitors who have taken steps to harness the power of blockchain technology.” Anthony Di Iorio

Since the 2008 global crisis, the financial services industry has been undergoing a sea change. Public confidence in the sector remains low, and emerging technologies promise to upend legacy institutions, including payments, lending, and capital markets.

A digital revolution is underway. Innovative new technologies are changing the industry. One technology in particular is leading this transformation. It’s called the blockchain, and it promises to be the most disruptive force since the internet.

This new internet technology has the ability to create units of digital information that cannot be duplicated. The most famous example is the digital currency Bitcoin, but the blockchain can also make other types of digital records that are incorruptible. The result is a new era of the internet, one that allows users to transmit units of value along with information.

Blockchains have the potential to decrease the relevance of traditional finance. At the same time, the technology allows legacy firms to create new revenue models while lowering costs by automating manual processes. Because of the risks — and the opportunities — that come with this new technology, banks, exchanges, and other financial institutions are currently evaluating the impact it will have on their business.

For existing firms, the stakes could not be higher. Companies that come out on top will have built a foundation for their future success — along with having the satisfaction of leading a once-in-a-lifetime transformation for their industry. Meanwhile, organizations that fail to act will potentially lose their core business to competitors who have taken steps to harness the power of blockchain technology. Risks and rewards Recognizing the risks and potentials of the blockchain, Silicon Valley and Wall Street are actively studying the technology. Institutions around the world, including banks (J.P. Morgan and Barclays) and exchanges (The TMX Group, Nasdaq, and the London Stock Exchange), are working intensively to develop an appropriate blockchain strategy, one that will allow them to keep pace with FinTech start-ups and, at the same time, make use of the technology to secure an advantage over their peers.

The blockchain’s ability to create value and authenticate information adds a new layer of functionality to the web. Already, users are able to perform transactions directly with one another — in 2016, Bitcoin transactions averaged over $200,000 USD per day. Aswell, the unbundling of traditional finance institutions is creating a wide range of new business opportunities. Nearly $23 billion of venture capital and growth equity has been invested in the emerging industry of FinTech (finance plus technology) over the past five years. Beyond finance, the blockchain promises to create new and as yet unimagined ways of doing business.

The block chain improves global communications by speeding up online interactions and lowering the costs associated with in- formation exchange. Just as email and cloud computing replaced their analog equivalents and altered daily life, blockchain technology promises to have an equally transformational impact. Corporations will be forced to adapt as blockchain innovations compete directly with banks, stock exchanges, and other incumbent financial institutions.

Plausible use cases for this technology that are already close to being implemented revolve around the automation of financial services and processes, allowing traditional businesses to replace aging back- end systems and radically improve efficiency. Many incumbents recognize they have the scale of resources needed — in terms of employee base and institutional knowledge — for gaining a foothold in this new economy. Beyond finance, blockchains promise to bring significant change to everything from the energy, health, and legal sectors, to identity and personal data management systems, and the sharing economy.