The cryptographic system underlying bitcoin might be more adaptable to bank needs than could be generally believed, we read in a commentary by Bitcoin Magazine:
“A company like Goldman Sachs or JPMorgan is hesitant to rely or work with a financial network in which the people keeping it alive are essentially anonymous,” says Popper [a NY Times’ reporter] in a Forbes interview. “Banks have to know who’s transacting and flag it if someone suspicious is involved in the transaction. But it’s quite easy in bitcoin to have an identity tied to an address in a way that would make a bank feel comfortable.”
Financial operators are attracted by blockchain-based financial networks with no single point of failure, which could keep running even if one of the participating nodes stops working or is taken out. They are also attracted by the relative speed and low cost of blockchain transactions.
But, according to Popper, bitcoin remains a thorny issue for Goldman Sachs, JP Morgan and other top financial players. The problems are bitcoin’s potential for anonymity, and the fact that the bitcoin blockchain is “powered by thousands of unvetted computers around the world, all of which could stop supporting the blockchain at any moment.”
Popper reports that JPMorgan and other major banks envisaged a new blockchain that would be jointly run by the computers of the largest banks and serve as the backbone for a new, instant payment system without a single point of failure. The new blockchain, decentralized but closed, would offer the benefits of the current bitcoin network without relying on end-users for its operations.
We wrote about IBM working on a similar non-bitcoin blockchain some time ago. We also discussed Goldman Sachs and its investment in a bitcoin startup. It increasingly looks like banks and other financial institutions are thinking on bitcoin and that they are simply waiting for more technological solutions. If IBM or some other company comes up with an alternative ledger-based system that could be adapted for the needs of the banks, this might be the breakthrough.
Banks themselves are not very innovative institutions, at least not in terms of specific technology solutions. Because of that, they rely on other entities to deliver appropriate technologic infrastructure. The same may be the case with bitcoin. IT companies might be working on distributed bitcoin-based systems that would conform to banking security standards and would allow the financial institutions to avoid anonymity. IBM might be the first company working on such a solution – it is still unclear what final form the IBM research will take. We expect further to follow.
For now, we focus on the charts.