Is Betting On Blockchain More Promising Than Bitcoin?

No matter how much we ignore, Bitcoin is taking the financial sector by storm. Just six years into its existence – it is still very young and very volatile. Major financial institutions are slowly embracing this budding cryptocurrency system. However, more often than not, we hear that leading investment banks are more inclined towards the underlying blockchain technology – the distributed ledger system, rather than the digital currency itself.

“Bitcoin itself may never be more than a curiosity. However blockchains have a host of other uses because they meet the need for a trustworthy record, something vital for transactions of every sort. Dozens of startups now hope to capitalise on the blockchain technology, either by doing clever things with the bitcoin blockchain or by creating new blockchains of their own”, The Economist said in an article titled, “The Trust Machine – The Promise Of Blockchain”.

Of course, one cannot deny the fact that bitcoin has had its share of negative publicity with all the scams, disappearances of bitcoin exchanges overnight and its use in darkweb marketplaces. Yet, there are bitcoin loyalists who believe in its potential to completely transform the global financial system.

Even leading banks and financial institutions are entering into the cryptocurrency ecosystem after denying its future prospects for repetitively. A most recent example in this context is the recent Digital Currency Group funding round that received support from MasterCard, Canadian Bank CIBC, New York Life, TransAmerica Ventures and many others. Earlier this year, the New York Stock Exchange invested $75 million in series C funding round of Coinbase, a bitcoin wallet and exchange company. In yet another instance, Goldman Sachs supported Circle Internet Financial, a bitcoin financial services startup.

However, an interesting argument against digital currencies has been put forward by Peter Ohser, the executive vice president of business development at global remittance giant MoneyGram, CoinDesk reported.

“Payments are already digital and real time. I can send cash using the existing rails. It’s there and it’s real. [Digital currency] is not solving a problem … There’s also a trust factor. People trust paper more than they trust data and that behaviour is not going to change”, he said.

On the other hand, blockchain technology is being considered by many as the next big thing. As The Economist puts it – it is an even more potent technology – the latest example of the unexpected fruits of cryptography. Industry leaders such as Microsoft, Barclays, NASDAQ and many others are all experimenting and even developing blockchain-based platforms. Also recent reports suggest that the Australian Securities Exchange (ASX) is considering replacing its existing clearing and settlement system with blockchain technology.

“The blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate. Bitcoin fanatics are enthralled by the libertarian ideal of a pure, digital currency beyond the reach of any central bank. The real innovation is not the digital coins themselves, but the trust machine that mints them—and which promises much more besides”, The Economist said.