Blockchain tech has been explored by a number of banks and financial institutions in the past few months, but the news that nine of the biggest names in the industry are teaming up to work on this initiative marks a huge leap forward. Among the group are JPMorgan, Goldman Sachs, Barclays, UBS, and Credit Suisse.
In line with this, the group will be working with a blockchain tech startup called R3CEV, which is a New York-based company comprised of trading and technology executives.
Blockchain Tech in Finance
Blockchain refers to the distributed public ledger of bitcoin transactions that is updated by a network of computers solving complex algorithms in a process known as bitcoin mining. It is decentralized in nature and is a consensus-based decision-making model, which means that the entries on the blockchain cannot easily be altered unless majority of the computers storing the ledger are also accessed.
With that, several firms and even governments have tapped into the potential of blockchain tech in terms of record-keeping, asset ownership changes, and trade settlement. Overstock has pioneered the application of blockchain technology in trade settlement, allowing Wall Street establishments to complete transactions at lower costs and at shorter spans of time.
Prior to this collaborative effort by the largest investment banks, other financial institutions had been working on blockchain tech on their own. However, a number of experts and researchers have pointed out that the system or network can be more stable if more institutions are using the same blockchain.
“If you’re looking to introduce applications with distributed ledger technologies to improve the financial markets, you can’t have each participant working to a different pattern,” said Christopher Murphy of UBS. “What R3 are doing is bringing a consensus which could establish common standards.”
With that, R3CEV aims to create consistent standards and protocols for the distributed ledger to be used in financial applications. It also plans on linking bank collaboration on research, experimentation, and design of various prototypes.