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Blockchain – disruptive technology or a hype?

Blockchain – will it be the death of banks, or is it just a hype? Though that question can not yet be answered, one thing is for sure: the interest for blockchain is growing.

“The blockchain is making a lot of new things technologically possible, but the question is whether they will also become commercially possible”, says Pehr Wissén at the Swedish House of Finance.

Blockchain technology and its applications is getting an increasing amount of attention.
“More and more organizations are investing in understanding and exploring blockchain technology, and developing models for how to work with it”, says Pehr Wissén, senior advisor at Swedish House of Finance.

A blockchain is a distributed database – a ledger of sorts – where the records are called blocks. Combining cryptography and information technology, the blocks contain a timestamp and a link to a previous block in the chain. The design makes it impossible to modify the data in a block without changing the entire chain.  The most famous application of blockchain technology is the bitcoin currency. 

What could blockchain technology mean to the financial industry?
“The simple answer is that it could diminish the need for intermediaries. Today, intermediaries spend a lot of time documenting transactions. If you borrow money from a bank, someone is lending money to the bank and the bank is lending it to you. The register is kept by the bank, but when the technology enables the loan to be done without the bank acting as an intermediary it can – if the vision holds – cut the cost of lending in half. And the banks will have a lot less business. But it’s too early to tell if this is doable or not”, says Pehr Wissén.

Is the importance of the blockchain exaggerated?
“That’s impossible to tell. We’ve seen an exaggerated optimism towards new technology before, for example during the dotcom-period. We might be in a similar situation now, and perhaps it will take 10-20 years before commercial applications of this technology are possible. I don’t think anyone can tell yet. But what we can see is that there is a growing interest, and that the blockchain technology is applied in more areas than the bitcoin. One example is the Swedish National Land Survey (Lantmäteriet) that are testing a system for registering and recording land titles that utilizes blockchain.”

What is the Swedish House of Finance doing on blockchain?
“We will arrange at least two seminars on blockchain, including our annual conference on August 22 where the first half of the day will be dedicated to blockchain and fintech. We have also invited professor David Yermack from the NYU Stern, who researches the implications of blockchain on the financial industry, to the Swedish House of Finance in late September”, says Pehr Wissén.

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