Want to Get Rid of Bank Fees? Cut out the Middleman – Your bank
One of the best things about my job is constantly being exposed to new and innovating things. Whether it is the latest and greatest marketing campaign, a new piece of technology or the latest iPhone, the space we get to play in every day is constantly changing, always improving and forever on the move.
very now and again something comes along that gets us excited, worried or frustrated (why another user interface update, Google? Why?)! And then there are those rare occasions where something comes along that makes you stop and go “holy crap!” These are usually things that have the potential to fundamentally shift the way the world works.
Enter Blockchain. Not something many have heard of, but you will. Not since Mark Zuckerberg sat in his dorm room lonely and slightly drunk inventing modern day social media has something got the potential to so dramatically change the way the world works.
Many of you will have heard of Bitcoin, the all digital crypto currency that is now accepted around the world for anything from buying pizza and games, to illegal firearms and drugs. It is a new way of paying for things that has spawned an industry. Blockchain is the technology that sits behind this.
First, let me explain, quickly, how it works and why is has the potential to cut out the ‘middle man’ and create an economy based on a single choice of truth.
Blockchain is essentially a digital ledger, a list of transactions that are recorded and stored, like back in the day when your business transactions were all recorded in a book (well, maybe not your day, but certainly in my old man’s day). Except this ledger has multiple copies that are synced all over the world on thousands upon thousands of computers, owned by thousands of individuals. Each time one of the ledgers is changed, so too are all the others. Sounds simple enough, right? So why the big deal, you ask?
Well, think of it like this: in the world we live in, when you are making a purchase, transferring money to a friend, withdrawing cash from an ATM or donating to your favourite charity, you are relying on a system of intermediaries whose job it is to make sure that if you give me $10, that $10 is taken from your account and put into mine. Get that wrong and either we are both going to be very rich, or very poor. That intermediary, otherwise known as the bank, then charges us fees to keep our accounts in order. All good in theory, and it works 99.99 percent of the time. However, these intermediaries, by virtue of what they do, end up holding a lot of power – enter the 2007 financial crisis. Another example: when you are transferring money from NZ to the US using
Western Union, the charges are obscene for what is essentially moving some data around in cyberspace.
Blockchain replaces that intermediary. That’s right, the days of banks as we know them could well be limited. By having a ledger that is synced across the world, with no one person or companyhaving their hands on the keys, it makes it very easy to keep track of everyone’s transactions. And how secure is it, you ask? Well, as it turns out, very.
The Blockchain is a genuine peer-to-peer model based on a single choice of truth. As the ledger passes through the chain, the data has to be continuously agreed upon. If there are changes to the data, every block that refers to it will have to unanimously agree to the change – we’re talking millions! This makes it theoretically immutable.
And it’s not just the financial system that could be disrupted, there are hundreds of applications using Blockchain technology, and money transfers just scratch the surface. When I heard about this a little while ago, and started to do research, interestingly enough, one of the things in the world with the highest amount of fraud is property and land ownership. With Blockchain, rather than a few signatures in front of a lawyer to confirm ownership of land, a contractual agreement can be added to the ledger as a transaction in the Blockchain. This digital contract is a self-executing agreement where the deal is converted into a computer code.
In many developing countries, agricultural land can be acquired by a corrupt government, with false documentation, in favour of an urban development. Generations can be stripped of everything they own with a manipulated contract. A footprint of all transactions will provide unprecedented transparency and contracts will be safe.
The most exciting thing about Blockchain? The potential it has for global prosperity. The world’s economy is growing but only a small minority are benefiting. Banks are exclusive to the world’s population that have monetary assets worthy of a bank account, excluding billions of people around the world. Remittances are the biggest financial exchange between developed and developing countries, overtaking the likes of financial aid.
With every Western Union transaction sent back to families in developing countries, a large fee goes to the bank. With Blockchain capabilities, countries have developed their own system through a series of tellers to convert money into Bitcoin and then back into local currency, avoiding all the normal regulations. So someone literally takes money, converts it into local currency and then hand delivers it to the next one until it makes its way to a village in the middle of nowhere. As the whole system is ‘Uberised’, the person-to-person payments are regulated and secure. The whole system promotes micro-financing by redirecting the wealth from the conglomerates to the tellers.
So do you need to start lining your mattress with money at the impending doom of your bank? Well, no, not any time soon anyway, but if its biggest campaigners are right about this revolution, it has the potential to re-evaluate our future and disrupt every industry as we know it. Blockchain – go check it out.