Banks are still betting on blockchain over bitcoin
Bitcoin is back in the limelight, with speculation again swirling around the mysterious identity of the creator of the world’s biggest cryptocurrency.
Intense media coverage caused a spike in the bitcoin price, following the publication of parallel investigations by tech news sites Wired and Gizmodo into the identity of the founder.
In Wired’s own words: “Either Craig Wright [a little known IT security expert] invented bitcoin, or he’s a brilliant hoaxer who very badly wants us to believe he did.”
For now, investor and media focus has returned to the currency itself rather than the increasingly popular blockchain technology behind it.
That technology has been of interest to banks for some time, as they try to slim down bloated transactional costs, understood to be between £40bn and £50bn a year globally.
The blockchain, a network of computers that must independently sign off each transaction before it is added to the “chain”, is regarded as a cheap and secure way of moving money.
The chairman of investment bank UBS, Axel Weber, recently lauded the blockchain as an ultra-efficient way to move money. This will not have gone unnoticed by the die-hard bitcoin faithful and libertarians who once dreamed that the cryptocurrency (and the infallible public ledger, the blockchain) could undermine and then revolutionise the global banking system.
However, banks' private blockchains should be considered similar to the original in name only, as the limited network of centrally controlled computers is much more open to manipulation.
In another twist, central banks themselves have proved to be surprisingly open to using decentralised crypto-technology. The Bank of England earlier this year revealed it is looking at ways it could put to use a blockchain “hybrid system”.
It’s the technology behind bitcoin that excites financial architects, but with the currency now officially considered a commodity in the US, it should not be written off entirely.
Indeed, it’s worth bearing in mind that in recent months its price has outperformed all the world’s other commodities.