Bitcoin has been around for about seven years and it has achieved great heights in such a short span. While bitcoin is already being adopted by a considerable number of people across the world, the technology that powers bitcoin transactions has become a bigger hit. Blockchain technology is behind all bitcoin transactions. Blockchain is a secure and transparent ledger that records each and every transaction that happens over the bitcoin network. All transactions needs to be confirmed on blockchain and the entry recorded to ensure there is no double spending on fraudulent transactions. Apart from bitcoin transactional data, blockchain can also record non-transactional data.
Banks and Blockchains
Blockchain technology has found its way into various applications other than bitcoin transactions. The use of blockchain technology varies from simple laboratory data management applications to secure proprietary financial transaction tools dealing with banking and securities. Recently we have seen banks experimenting with blockchain technology to evaluate its use in their day to day operations. Few banks are already using Ripple network on an experimental basis while a group of international banks work on creating a proprietary blockchain, better known as federated blockchain. The federated blockchain is being created with plans to link all these banks to a network, similar to that of bitcoin network and use the network to transfer funds from one bank/branch to another instantly while bypassing the conventional routes.
Even though the research is currently still in the initial stages, its implementation will not take much time. However, wide spread adoption is another question. Banks and corporations are giants, taking a long time before they could achieve widespread implementation. But once implemented, it may spell doom to bitcoin as we know it today. It is highly unlikely for banks and financial institutions to adopt bitcoin or any other open source technology on an as-is basis. So, the probability of banks adopting their own cryptocurrency or a token is very high.
Once blockchain technology is implemented in banks across the world, the turnaround time for fund transfers will fall rapidly. Banks will be able to process transactions at the same rate as bitcoin transactions. The transaction fees associated with fund transfers will also fall drastically as banks will be able to successfully circumvent SWIFT network and central banks. These benefits will be passed on to customers. In short, banking customers will be able to enjoy almost all the benefits bitcoin currently offers through the banking system. Once banks start processing transactions over blockchain, these crypto tokens used by banks will be readily convertible to local fiat currency without the need of any third party exchanges.
Decentralized no more
Bitcoin is popular mainly because it offers fast, easy and an economical way to transfer funds. If mainstream banking sector begins to offer all these benefits, then people will start opting for conventional banks over bitcoin. In addition to it, few mining pools are growing bigger each day. The top three bitcoin mining pools put together control over 50 percent of the bitcoin hashrate and F2pool alone has a share of close to 25 percent of total available bitcoin hashrate. If the trend continues, bitcoin may not stay decentralized for a long time. Once people realize that the decentralized nature of bitcoin network is about to be compromised, they might start looking for other options. Bitcoin network’s trouble reaching a consensus, if continued will compound the problem and may lead to an early downfall of our much beloved cryptocurrency.