Blockchain , the technology behind cryptocurrencies such as bitcoin, has the potential to disrupt the financial services industry.

Although popular and business media tend to focus almost exclusively on cryptocurrencies, this is just one application of blockchain. That narrow focus on cryptocurrencies has detracted from other far-reaching potential applications of the technology. Some of those applications could simultaneously challenge the value proposition of incumbent financial services providers, and at the same time provide a new platform to radically change how financial services providers conduct their business.

In the brief discussion that follows, we will outline (i) the main business lines in the financial services industry that could be impacted by blockchain and (ii) new regulatory, security and consumer protection issues that will arise as a result of blockchain’s logic of decentralisation.

Conceptually, blockchain may be viewed as a massive spreadsheet that records and stores data that are generated in unique transactions by unique users. In technical terms it is called a distributed ledger and it is expected to be applied to many areas both within and outside of finance.

Satoshi Nakamoto, the anonymous inventor of blockchain, was motivated to build a system capable of facilitating peer-to-peer online payments between people without the need to go through a financial institution. Therefore, financial institutions spanning the gamut of bill collections agencies to remittance companies and banks are in the cross hairs of Nakamoto’s blockchain.

Transactions are validated on the network, thereby removing the need for any intermediary or third party to give legitimacy to a transaction. This arises from the fact that no one person can change the information on the network. Consequently, people could directly conduct financial transactions among themselves. For example, a father in England could transfer the college tuition directly to his daughter in Jamaica without the need for a bank or remittance company.

But before blockchain can be fully diffused and accepted, the technicians must solve for certain advantages that the traditional financial companies currently enjoy.

http://www.jamaicaobserver.com/business-observer/blockchain-is-coming-ready-or-not_123325