BLOCKCHAIN: AN INTEGRATION WITH YESTERDAY’S FINANCIAL INDUSTRY
Views From Banyak Group
By Oleg Biletsky, 28 June 2017
Blockchain has found its seat at the table in today’s financial industry. It’s not a question or a perception, it’s a discussed topic over coffee, at conferences, and in the boardroom. Less than two years ago in one of its equity research reports from December 2015, Goldman Sachs stated that “blockchain technology could disrupt everything.” The Economist reported the same year that blockchain could radically transform “how our economy works.” Major IT corporations such as IBM and Microsoft began making long-term commitments to further develop blockchain technology and integrate it into our daily life. Blockchain has been predicted to change the world the way we know it, but what exactly makes it so revolutionary?
What Is Blockchain And How Does It Work?
At its core, blockchain is a decentralized database of various records, first developed to serve as a supporting system for Bitcoin, a digital currency designed for peer-to-peer trading without the use of an intermediary. Records used in blockchain are called “blocks,” and they are linked with other blocks in the system using a “hash” function, which is a mathematical encryption that creates a unique string of characters that are woven together into new “hashes.” If someone were to attempt to modify those records, they would have to tamper with all the other timestamped and previously shared blocks in the database to do so, as the result would lead to a mismatch that would continue through all future blocks. This keeps the records in the database secure and makes blockchain a trustworthy source of information. The figure below offers a different way of interpreting blockchain’s security, where the miner represents a hacker attempting to modify a past transaction in the structure of all the blocks, while a new block (block 91) is added to the system: