The Bank of England report on the technology of payment and digital currency considers blockchain technology that allows the digital currency of the ‘original technology innovation’ that can have a far-away implication of the financial industry.
So what is the block chain and why are you all excited?
The block chain is a public book of publicly decentralized online from all digital transactions that have occurred. This is the equivalent of the digital currency from the Ledger Bank Street which records transactions between two parties.
Just as our modern banking system cannot function without the means to record the exchange of fiat currency between individuals, as well as digital networks do not function without trust that comes from the ability to accurately record digital currency exchange between parties.
It is decentralized in the sense that, unlike traditional banks which are single holders of the master master’s book from their account holder savings, the blue chain return book is divided among all network members and not subject to certain financial institutions and provisions and conditions.
Continue? Why is this preferred than our current banking system?
Decentralized monetary networks ensure that, sitting outside the current financial infrastructure that is connected constantly can mitigate the risk of being part of it when everything is wrong. 3 The main risk of centralized monetary systems highlighted as a result of the 2008 financial crisis is credit, liquidity and operational failure. In the US itself since 2008 there were 504 bank failures due to bankruptcy, there were 157 in 2010. Usually such collapse does not endanger account holder savings due to federal / national support and insurance for several hundred thousand dollars / pounds first, bank assets are usually absorbed by other financial institutions but the impact of collapse can cause uncertainty and lack of problem problems by accessing funds. Because the decentralized system such as the Bitcoin network does not depend on the bank to facilitate the transfer of funds between 2 parties but more depend on tens of thousands of users to authorize transactions as many as possible network members to ensure transactions continue to be authorized if there is one network member ‘collapsed’ ( Look below).
But the bank does not need an impact on savers, operations I.T. Failure As recently stopped RBS customers and Lloyds accessing their accounts for weeks can have an impact on someone’s ability to attract savings, this is the result of Legacy I.T. Infrastructure that groanes under pressure keeping with the growth of customer spending and lack of investment in general. The decentralization system does not depend on this kind of infrastructure, instead is based on the combined processing power of tens of thousands of users who ensure the ability to increase as needed, mistakes in any part of the system that does not cause the network to stop.
Liquidity is a real risk of the centralized system, in 2001 the Argentine Bank froze and introduced their capital control as a result of their debt crisis, Spanish banks in 2012 changed their small molds to allow them to block certain withdrawals and Cyprus banks briefly freeze Customer account and use up to 10% of individual savings to help pay off national debt.