Bitcoin in the Headlines is a weekly analysis of bitcoin media coverage and its impact.
Major banks are now loudly proclaiming their love for the distributed ledger.
However, the bank’s love explosion for blockchain technology may not have been what Satoshi Nakamoto intended – or predicted – when bitcoin was first created.
Despite this, this week’s coverage was mostly about blockchain technology, as distributed ledger startup R3CEV caused a ripple of excitement again when it announced an additional 13 banks had joined its project.
Elsewhere, a prominent science publication published a piece about the future of cryptocurrencies, focusing on bitcoin’s origins, its association with illicit behaviour and the ongoing fascination with the blockchain.
The Financial Times‘ Kadhim Shubber began his piece on R3’s big deal, noting how Citi, Bank of America and Morgan Stanley had joined the growing and still secretive initiative.
“The addition of the banks, which also include HSBC, BNY Mellon, Deutsche Bank and seven others, is a sign the industry is gathering behind R3 in one potential implementation of the distributed ledger technology behind the currency bitcoin.”
Blockchain technology has enjoyed increasing popularity among traditional finance institutions and executives. Earlier this year, Blythe Masters, a former JP Morgan executive shocked with her decision to join Digital Asset Holdings as the company’s CEO.
As Shubber points out, Digital Asset – R3’s seeming competitor – is just one of many startups attempting to reduce costs in banking.
“Blockchain is the shared database technology beneath the currency bitcoin and is being touted as a way of overhauling outdated bank back-office systems. Its backers point to inefficiencies in the aging network of bank payments and settlements, where transactions in markets like syndicated loans can take 20 or more days to finalise,” said the journalist.
Integrating the technology
Writing for CNBC, Matt Clinch began his piece by commenting how the latest announcement suggested a wider acceptance of bitcoin.
“Rather than shunning potentially disruptive digital currencies,” he said, before adding,”the biggest names in the financial industry are looking at integrating the technology behind bitcoin into every day use”.
The good news for bitcoin was short-lived as the journalist then duly noted, that the blockchain – not the digital currency – is what really seems to have captivated mass-attention.
“Bitcoin is a virtual currency that allows users to exchange online credits for goods and services. However, many see the real worth of the cryptocurrency being the technology behind the coin. Called the blockchain — this is a public and transparent ledger of all bitcoin transactions.”
The article then rounded off with a cautious conclusion.
“It might still be early days but the technology could effectively allow payments to be made instantly without a centralized authority and it would also be transparent with each bank being allowed access to the ledger,” said the reporter.
The ‘dream team’
Oscar Williams-Grut alluded to the desirability of the banks’ all star-team with the headline “13 More Banks Just Joined The Finance ‘Dream Team’ Working on Bitcoin’s Blockchain”.
Taking the total number of bank partners to 22, Williams-Grut noted how the list read like a “who’s who of investment banking”.
Similarly to his contemporaries, the journalist then went to outline the basic principles of blockchain technology:
“The software cuts out the need for a ‘trusted middleman’ to sit in between parties in a transaction as it acts as that middleman. This makes transactions quicker, cheaper, and easier when compared to the current systems bank use.”
For these reasons, the journalist added, “banks are keen to see whether it can be adapted for use with traditional currency, rather than just bitcoin”.
On this note, Nasdaq’s Martin Tillier wrote a piece titled “The Irony Behind Banks’ Interest in Blockchain” where he noted the issues that may aries if blockchain development boosts the digital currency markets.
He then noted: “The possibilities if that is done are endless so that focus is understandable, but one of the side effects of all the publicity is to add strength to the currency, and that could end up having a detrimental effect on those very same banks.”
Bitcoin and beyond
Nature, a prestigious science journal, published a piece detailing bitcoin’s short, albeit eventful history.
“When the digital currency bitcoin came to life in January 2009, it was noticed by almost no one apart from the handful of programmes who followed cryptography. Its origins were shadowy: it had been conceived the previous year by a still-mysterious person or group known only by the alias Satoshi Nakamoto.”
The article continued: “And its purpose seemed quixotic: bitcoin was to be a ‘cryptocurrency’, in which strong encryption algorithms were exploited in a new way to secure transactions. Users’ identities would be shielded by pseudonyms. Records would be completely decentralised. And no one would be in charge – not governments, not banks, not even Nakamoto.”
Yet, the article adds, the idea caught on:
“Some of its growth is attributable to criminals taking advantage of the anonymity for drug trafficking and worse. But the system is also drawing interest from financial institutions … It has inspired the creation of some 700 cryptocurrencies. And on 15 September, bitcoin officially came of age in academia with the launch of Ledger, the first journal dedicated to the cryptocurrency research.”
Bitcoin aside, what really fascinates academics and entrepreneurs is “the innovation at bitcoin’s core”, the blockchain, reads the article, which cites Nicolas Courtois, a cryptographer at University College London, who says that bitcoin’s blockchain could be “the most important invention of the 21st century – if only bitcoin were not constantly shooting itself in the foot”.
So there you have it, the blockchain is “hot stuff” and with little sign of banks’ fascination with it abating, it is probably fair to say that October will see more blockchain loving.
Heart image via Shutterstock.