Banking as a whole can be somewhat simplified when it comes to discussing the implementation of distributed ledger technology, with two different types of main banks which even at the highest level are somewhat straightforward. Firstly, investment banks manage risk, move and raise money. Retail banking however carries out deposits, loans, payments and transfers of money to others. Over time, financial technology companies are beginning to erode the traditional capabilities and need for this type of banking and some companies are beginning to create new ways to transfer value, with the implementation of technologies such as Bitcoin. One of the biggest risks to investment banking in particular is the rise of distributed ledger technology, which is leading to funds being moved quickly and efficiently, without the need for the middle-man, for example the bank. In addition to this, risk management is being handled by separate contracts, and disturbed by distributed ledgers, creating hedges against the market. While this is a simplified definition of what banks actually do, the push towards technology such as this is clear. Here, we’re taking a look at the evolution of this kind of technology and what the future holds.
In order to determine the future of distributed ledger technology, we must first examine how this has evolved. Phase one, the technology’s inception, came in the form of Bitcoin’s development – appearing in 2008. This decentralised cryptocurrency allows cash to be transferred seamlessly without any controlling party involved. Nevertheless, the regulatory environment at the time of its inception meant that the currency struggled to grow. While there was significant potential in the cryptocurrency, a number of scandals and huge costs spent by mining companies to produce these Bitcoins initially led to the cryptocurrency being overlooked as a potential type of distributed ledger technology.
With the price surge in Bitcoin throughout 2017, and the increase in media exposure, a number of opportunities are beginning to boost blockchain technology. This is providing much more of an insight into how this has potential in the future to be used as a form of distributed ledger technology. While there are still some concerns relating to the volatility of the Bitcoin, many people are looking to the blockchain technology behind the cryptocurrency and its potential. Now, more consortiums are looking to leverage the technology, and attempting to implement some form of single distributed ledgers, to ultimately manage utilities in a more efficient manner. More regulators and consumers are beginning to become more familiar with the benefits of the blockchain technology, and this could ultimately lead to more of an implementation of the technology across the market in the future.
Overtime, phase three will begin to take place, with a number of opportunities beginning to transpire as market regulations on the technology progress. As the network begins to mature, practical uses will become apparent for distributed ledger technology, and soon a publicly authenticated network will make this more operable. Gradually the development of standard ledgers will be introduced into business models, and the involvement of other technologies like the Internet of Things and decentralised marketplaces could ultimately change the industry for the better.