Shane Leonard, CFA: “[…] Banks see the potential of a shared database to massively cut their overheads, not as a way to eliminate their role in the financial services industry. A shared database of transactions & ownership could eliminate significant settlement costs, back-office costs, increase the speed of transactions, reduce errors, and potentially reduce their capital requirements.
The complexity of the a stock market trade is to ensure no failed transactions, to ensure you own what you sell and get paid for it by the buyer. In that way, it’s like Bitcoin’s blockchain ensuring no double-selling.
These institutions store trillions of dollars of wealth for their clients. They process trillions of dollars of transactions daily. They don’t play loose or fast. Not if they want to remain in business.” – URL
It’s nice to read a more nuanced and balanced look at how ‘bankchains’ might lower costs for banks in the future, regarding the whole “I like ‘the blockchain’, but I’m not too crazy about bitcoins”-narrative told by banks and journalists right now. Although I don’t entirely agree on its conclusions (I don’t believe the banks will be able to create anything that can compete with Bitcoin) its comparison between the current financial system and the blockchain is rather spot-on. The article also accurately singles out certain elements in current settlement systems that are ripe for a blockchain make-over.
The text mentions R3 and its offer to banks to provide them with the “promise of the blockchain”, and one of the banks participating in that project projected a 5-7 year time-frame before any new blockchain-based system could be in use.
Seven years in Bitcoin speed is an eternity, especially with all the venture-backed activity going on right now in the Bitcoin ecosystem. The system R3 and its banks put in place in about seven years will go up against a much more mature competitor.