Bitcoin has been around since 2008 and generally is a term most people online and in finance have become accustomed to. Blockchain on the other hand is a lesser known term, but the idea of it has been around for decades. It was only when Bitcoin came to fruition that Blockchain came into action as the technology underpinning it.
Blockchain is effectively a data structure that places digital transaction records into ‚Äòblocks‚Äô which are then ordered chronologically into a ‚Äòchain‚Äô using a variety of complex algorithms. An encryption process called hashing is them carried out by a number of computers around the world. Once all of the computers are in agreement, each block will then receive a digital signature that cannot be replicated. This then means that it cannot be altered or changed in any way, can only be added to and will be seen by everyone in the network simultaneously.
Now, in terms of why Banks are now considering Blockchain as with anything in finance it is to do with money and the competitive nature of the field. The biggest role of the bank is to keep its customers money safe and in order to do that they require complex computer systems to constantly communicate with each other. The only issue with this is that the technology behind it is becoming extremely outdated and consequently very expensive to use.
In using a customised Blockchain program, banks will be able to cut out the time and money spent on older systems slowly processing transactions. It would also cut out any need for manual processing which also takes a lot of time, most notably because of human error. More importantly it makes the job of securing money and transactions a lot easier with a system that is near impossible to hack.
The beauty of Blockchain is that in order to mount a successful attack, hackers would need to have access to every copy of that database at once which due to its global distribution would be impractical. Any fraudulent activity can be spotted and flagged immediately using computer systems with elaborate algorithms being able to work 24/7.
Undoubtedly this technology is in its early days but the potential for it to be used globally by banks is definitely there. Subsequently, in the years to come it is likely that it is an avenue the financial world will want to explore.