Blockchain Revolution

Value Innovation: The bitcoin blockchain was designed for moving bitcoins,
not for handling other financial assets. However, the technology is open
source, inviting experimentation. Some innovators are developing separate
blockchains, known as altcoins, built for something other than bitcoin
payments. Others are looking to leverage the bitcoin blockchain’s size and
liquidity to create “spin-off” coins on so-called sidechains that can be
“colored” to represent any asset or liability, physical or digital—a corporate
stock or bond, a barrel of oil, a bar of gold, a car, a car payment, a receivable
or a payable, or of course a currency. Sidechains are blockchains that have
different features and functions from the bitcoin blockchain but that leverage
bitcoin’s established network and hardware infrastructure without diminishing
its security features. Sidechains interoperate with the blockchain through a
two-way peg, a cryptographic means of transferring assets off the blockchain
and back again without a third party exchange. Others still are trying to
remove the coin or token altogether, building trading platforms on private
blockchains. Financial institutions are already using blockchain technology to
record, exchange, and trade assets and liabilities, and could eventually use it
to replace traditional exchanges and centralized markets, upending how we
define and trade value.
Open Source: The financial services industry is a technology stack of legacy
systems standing twenty miles high and on the verge of teetering over.

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Changes are difficult to make because each improvement must be backward
compatible. As open source technology, blockchain can constantly innovate,
iterate, and improve, based on consensus in the network.
These benefits—attestation, dramatically lower costs, lightning speed, lower risks,
great innovation of value, adaptability—have the potential to transform not only
payments, but also the securities industry, investment banking, accounting and audit,
venture capital, insurance, enterprise risk management, retail banking, and other
pillars of the industry. Read on.