The advent of blockchain technology has had a disruptive effect on many industries, including finance. The decentralized ledger of blockchain offers a
The advent of blockchain technology has had a disruptive effect on many industries, including finance. The decentralized ledger of blockchain offers an alternative to several of the main functions served by big banks, credit agencies, and other financial institutions, namely serving as an intermediary and a means of verification. Consumers put their trust into these institutions to ensure that their money is secure, their transactions are safe, and their financial records are maintained. However, the growing adoption of blockchain by consumers establishes a different form of trust–a mutual, peer-to-peer trust.
In a Goldman Sachs interactive report about cryptocurrency and the blockchain, the report noted the potential of blockchain’s distributed ledger functions and how that might shift the balance of trust for consumers. “The technology is still new, but its potential is enormous…. Because blockchains establish trust, they provide a simple, paperless way to establish ownership of money, information and objects—like concert tickets.”
Cameron Chell, blockchain entrepreneur and co-founder of BitRail, a blockchain-based infrastructure that allows organizations to employ regulatory-compliant cryptocurrencies for transactions, recently spoke about the ways in which he sees blockchain technology moving consumers away from placing all their trust in institutions.
“Society & certainly all economics run on trust, there is no other currency other than trust,” Cameron Chell noted. Speaking on blockchain and its potential, he said, “When you have a system that can replace trust or create an environment where you can transact in a trustless way, the impact globally to me is beyond measure.”
As Rachel Botsman wrote in an article for Wired, entitled “How the Blockchain is Redefining Trust,” this looming shift–away from trust in institutions and towards trust in blockchain technology–is driving some financial institutions to invest heavily in blockchain technologies out of a fear that they will be left behind. As Botsman puts it in her article, “They have to embrace this new paradigm to ensure it works for, not against, them.”
Botsman noted that the blockchain could become a new repository of value; it could facilitate peer-to-peer borrowing by allowing people to check the creditworthiness of potential borrowers; it could perform the services traditionally facilitated by credit cards and other money transfer services; and it could provide transparent reporting on the financial transactions of an organization in real time, eliminating the need for traditional accounting practices and outside audit firms.
This is what Chell alludes to when he speaks about the evolution of blockchain technology and how it can help consumers. “We’re talking about removing friction from every single aspect of interaction–not just transaction, but interaction,” he said. Chell expounded upon that point in speaking about one of his main aims with BitRail: “To us, everything that we do is about creating trust, and eventually that’s what will remove that friction.”