Those in the Bitcoin industry feel it is a positive trend to see so many different financial institutions work on embracing blockchain technology. At the same time, there are others who are wondering if these developers are just being attracted by greed, or if they want to make the world a better place. Regardless of which side you are on, the question remains a valid one.
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Removing The Need For Third-party Verification
While it is positive to see a future in which the banks rely on blockchain technology, there are still some misconceptions about this idea. Unlike what most Bitcoin enthusiasts might think, banks and other financial institutions are not looking at ways to work with the Bitcoin blockchain. Instead, they are developing their own solutions, the so-called “bankchain”.
In a way, it would only make sense for financial institutions to create in-house developed blockchain solutions. After all, these organizations have been fighting tooth and nail to differentiate themselves from Bitcoin as much as possible, but at the same time, these bankchains are not solving the problem that exists in the financial world today.
Relying on third-party verification is no longer a viable option in the financial world. Separate bankchains will not be able to communicate with each other and will still require third-party verification to complete transactions. The best case scenario would be to have this process completed through autonomous smart contracts, although that might be a bridge too far for the time being.
Also, there is the problem of securing a bankchain. Proof-of-work seems to be the most secure way of protecting a blockchain network from harm, and this solution works quite well for Bitcoin. Whether or not bankchains will be secured by the same method, or rely on something else entirely, remains to be seen.
Without any proper form of consensus, a bankchain will not be able to validate transactions in the same way that a blockchain would. As soon as there needs to be a third-party arbiter involved in the process, the entire concept can no longer be classified as a blockchain. Instead, the entire idea will look like a glorified version of traditional databases, which would only make matters worse.
Are Some Banks Out To Discredit Blockchain Technology?
No one is pointing the finger of blame at anyone in particular just yet, but the approach of using permissioned blockchains and bankchains raises a lot of questions. Some people might even argue the banks are out to discredit blockchain technology simply because they have no way of reproducing its measure of success.
It will be interesting to see what the future will bring in regarding the unification of traditional finance with blockchain technology. One thing’s for sure: the technology will prevail in the end., but the battle will be long and hard and without the right approach the entire concept is on a rocky foundation for the time being.
What are your thoughts on this entire concept of privately distributed ledgers and permissioned blockchains? Do you think bankchains will ever become a reality? Let us know in the comments below!