Centralization in Blockchain innovation
Can banks devise a centralized business model for decentralized Blockchain technologies?
Consensus—the cornerstone of business models for Blockchain technology in banking services
An authenticated system of ownership that verifies the entire transaction chain is no longer a dream in the financial sector: this is what is known as “Blockchain technology.” The ability to automatically and unequivocally check whether a person really owns what they claim and to trust other actors are the new benefits offered by Blockchain and is particularly relevant for financial markets.
Blockchain technology is fundamentally based around consensus, i.e., all parties agreeing to network verified transactions. The anonymity of participants constitutes an expensive commitment, as is demonstrated by the work on the Bitcoin Blockchain; when participants are known and trusted, commitment is possible without the high costs. This commitment can be created in various ways: namely, proof of a stake, where fraudulent transactions would be penalized, or multi-signature validation, where a previously defined majority could validate a transaction. However, we believe that the best alternative for banking services, especially securities services, would be centralized validation in a powerful decentralized system that retains the need for a trusted third party.
Performance magazine issue 20, January 2016
Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.