Arjan van Os, Head of Innovation Centre at ABN AMRO, lauded the technology behind the digital currency in a new article, called “The Next Big Thing”. According to van Os, the blockchain has a number of important benefits, including high speed and low cost of transactions.
“What the Internet has done for information and the way we communicate, the blockchain will do for value and the way we look at trust. The financial world is going to flip upside-down,” he wrote.
One of the key advantages of the blockchain technology, van Os noted, is its high security level. “A single transactional relationship can be made up of hundreds of ‘nodes’ – data points containing transaction information. Each node maintains an identical copy of a shared transaction ledger – the so-called ‘single source of truth’,” he said.
“As transactions take place, the nodes communicate with each other to verify that the transaction is valid. If the ledgers don’t match up, the transaction is rejected. In this way, transactions of every kind can be safely and transparently managed, without the need for a trusted third party.”
Besides, it is almost impossible to hack the blockchain due to the decentralized and distributed nature of the technology. “The Blockchain can be housed on hundreds of servers, all over the world. That virtually eliminates the single point of failure: if one server is hacked, the other nodes will recognise the intrusion and block the hacking attempt. The more nodes added to the Blockchain, the more security the transaction has.”
Writing about smart contracts, Van Os noted he recognizes the potential of such innovation. “Through specific scripts in the Blockchain, all conditions of any contractual agreement can be stored, verified and secured within the system. In this way, users can program the exact conditions under which a contract can be executed, thereby mitigating risk and increasing trust for all stakeholders,” he wrote in an article.
Meantime, van Os doesn’t use the word “bitcoin” in the article, what means he is not interested in this application of the technology. However, he admits that the blockchain has a potential to transform the financial system.
According to van Os, not only banks should embrace the new possibilities offered by the technology. “The Blockchain will have implications for insurers, realtors, notaries – virtually every trusted third party in every type of transaction. The possibilities are nearly endless. From currency to trade to contracts. From property to identity management to proof of ownership. From loyalty programmes to elections,” he said.
The blockchain could be used to enhance cross-border payments, including correspondent banking, business-to-business payments and peer-to-peer remittances. Some banks are already experimenting with the technology, among others UBS, Barclays, Santander Bank, BBVA, Goldman Sachs, BNY Mellon, Westpac and USAA.