This IDC Financial Insights Perspective looks at:
- Blockchain initiatives being undertaken by major banks
- Potential use of blockchain in the future
- Use of external blockchain support and assessment of the capabilities of these organizations
- Factors driving banks' interest in blockchain
- Technology challenges impacting blockchain implementation
The major problem with current blockchain processes that are based on open permissionless assessment is the tremendous amount of computing power and the associated electricity and cooling needs. This is needed to post transaction blocks to the ledgers and maintain the integrity of the database and supporting network. Bitcoin is the most familiar product based on this open principle. Because of the open system resource needs, most banks are looking at blockchain solutions involving permissioned invitation only access. This has resulted in a proliferation of blockchain solutions. The increased complexity resulting from multiple solutions has resulted in the formation of consortia in an attempt to introduce industrywide standards.
"We believe that distributed ledger technologies will help create a structure for financial transactions that will increase process efficiencies, speed up settlement, and reduce fraud," said Robert Smythe, research associate for IDC Financial Insights. "Over time, they also have the potential to change how banking records are maintained and transactions are processed. The key to this transformation will be to create simplicity out of the blockchain complexity that exists today. But a great deal of research and development needs to occur before this happens, hence our prediction of a five-year time horizon before distributed ledgers become part of banking processes in a meaningful way."
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