25 June 2014 / The Australian – Bitcoin and its fellow cryptocurrencies engender their fair share of enthusiasm and scepticism, but at a time when the financial services industry is coming to grips with wave after wave of disruption, how long can our banks afford to ignore virtual currencies?
There’s an inbuilt resistance here that to some extent is justified. Bitcoin and its ilk have an image problem, and for banks there’s still far too much volatility and opacity in the cryptocurrency’s market to make it worth their while.
While regulators across the globe try to create a framework that will be make cryptocurrencies more palatable to ordinary consumers, some established players of the bitcoin universe warn that the wait-and-see attitude of our financial sector could hurt them more than they can imagine.
Melbourne-based bitcoin company CoinJar’s co-founder and chief executive, Asher Tan, says that financial institutions need to start focusing less on bitcoin as a currency and instead home in on what it offers as a payment network. “I don’t want banks to invest in bitcoin. I want them to focus on the use of the bitcoin protocol for tasks such as payment verification,” he says.
“Right now payment verification relies on networks of trust between multiple third parties. Each entity and network required adds cost and time. This legacy network wasn’t built for a global, digital economy.”
Bitcoin solves this problem by decentralising the maintenance and automating the trust required. Every transaction made in bitcoin is recorded by a global network of computers and posted to a public register, ensuring that the same unit of money can’t be used twice. The owners of computers solving and verifying these transactions are rewarded with new bitcoins for their work.
Tan says this validation ledger — called a “blockchain” — could be the game changer for banks trying to catch up in the payments market. As a ledger, blockchain provides a fundamental validation infrastructure which could be used to develop tools that add transparency, improve processing efficiency and, more importantly, reduce fees for buyers and sellers….. Read more
