The Next Big Thing

Blog -

Blockchain

Imagine a time when the job you perform can be entirely replaced by technology. Picture a day when the trust that financial institutions worked decades to build, can be duplicated electronically in seconds. Think about a system, invented by anonymous strangers, which creates more security, speed and transparency than the financial world has ever seen. Science fiction? Hardly. That time is here. That day is today. That system is Blockchain. Fasten your seatbelts. What the Internet has done for information and the way we communicate, the Blockchain will do for value and the way we look at trust. The financial world is going to flip upside-down.

Internet Banking caused us to shift the way we interact with customers. Blockchain technology could make our current business model obsolete. Arjan van Os Arjan van Os Head of Innovation Centre

Get to know the Blockchain

The Internet is an information-based network. It has changed the way we interact, the way we shop, and yes, the way we bank. It allows us to store and share information in ways that were never possible before. For the most part, changes have come incrementally – as the technology has evolved, we have evolved along with it. The Blockchain, however, won’t be an incremental change. It will be a complete paradigm shift.

The Blockchain is a value-based network. It is a platform of complicated algorithms that stores and transfers value – from cryptocurrency to property to contractual agreements – in a safe, transparent and trustworthy way – without the need for third-party intervention. While Internet Banking caused us to shift the way we interact with customers, Blockchain technology could make our current business model obsolete.

A new level of security

Among its many benefits, Blockchain technology offers an unprecedented level of security. A single transactional relationship can be made up of hundreds of ‘nodes’ – data points containing transaction information. Each node maintains an identical copy of a shared transaction ledger – the so-called ‘single source of truth’. As transactions take place, the nodes communicate with each other to verify that the transaction is valid. If the ledgers don’t match up, the transaction is rejected. In this way, transactions of every kind can be safely and transparently managed, without the need for a trusted third party.

Connect and protect

The Blockchain can be housed on hundreds of servers, all over the world. That virtually eliminates the single point of failure: if one server is hacked, the other nodes will recognise the intrusion and block the hacking attempt. The more nodes added to the Blockchain, the more security the transaction has.

One of the ‘hidden gems’ of Blockchain technology comes in the form of Smart Contracts. Through specific scripts in the Blockchain, all conditions of any contractual agreement can be stored, verified and secured within the system. In this way, users can program the exact conditions under which a contract can be executed, thereby mitigating risk and increasing trust for all stakeholders.

Rethinking everything

It’s clear to see that Blockchain has the potential to turn the financial world upside-down. Trusted third parties exist to mitigate risks and guarantee the successful execution of transactions. When someone transfers funds into your account, the information about the transaction arrives before the actual funds do. Banks bridge the gap in between. In the Blockchain, information and value will be transferred simultaneously. So risk is automatically mitigated, and a trusted network replaces the trusted third party. All at a fraction of the cost.

But it’s not just banks that need to change their perspective and prepare for a new role. The Blockchain will have implications for insurers, realtors, notaries – virtually every trusted third party in every type of transaction. The possibilities are nearly endless. From currency to trade to contracts. From property to identity management to proof of ownership. From loyalty programmes to elections.

Reinventing ourselves

So, what can we do? How do we stop ourselves from becoming obsolete? The answer is quite simple. We learn. We explore. We investigate. We open ourselves up to change, and embrace all the possibilities that lie in store for our futures. We not only need to change the way we do business, but the type of business we do.

And, as crazy as it may sound, now is the time to use our imaginations. To re-examine every process, system, procedure and type of contract we can think of, and see how Blockchain can be applied to make it better. Faster. Safer. We must be willing to change our roles, our skills and our knowledge in order to adapt to this ‘next big thing’ and to take full advantage of this technology.

Getting there

Blockchain technology is out there, tested, proven and operational. However, the context in which Blockchain operates is still quite immature. If we compare this moment to the early days of the Internet, we are in the ‘just before Netscape arrived’ moment. So this is the time in which we must learn as much as we can, experiment with all the possibilities, build networks made up of Financial Institutions, FinTechs, start-ups and software experts. We, ABN AMRO, must be open to redefining our place in the financial industry. After all, the digital world is being redefined as we speak.

Watch the video of our Startup Friday about Blockchain, in which we explain how to apply it.

Read more about

Join the discussion

ABN AMRO would like to know your opinion, so below this article you can react to this article via Disqus. By doing so, you agree to the conditions for reacting to articles on our website.

More blogs

Filter on