Though bitcoin is known predominantly as a currency and payment method, the blockchain technology behind it has the potential to be a disruptive force to the financial system, according to a new report from research and consulting firm Celent.
The Disruptive Potential of Bitcoin: Why Everyone in Financial Services Should Care takes an in-depth look at the early achievements of companies that have emerged since the rise of bitcoin, and attempts to dispel myths about the virtual currency. The report also identifies the top challenges bitcoin faces as it seeks mainstream adoption, such as poor user experience, safety of funds and regulatory concerns. Bitcoin’s decentralised nature, though one of its most attractive features for many users, also presents a substantial challenge for the overall ecosystem.
Celent notes that the blockchain, the decentralised cryptographic ledger at the heart of bitcoin, has the potential to go far beyond payments. While the blockchain keeps track of value-transfer transactions, such a “cryptoledger” could also be used to exchange and keep track of other digital assets, such as financial instruments, public records and smart contacts. There are currently a number of projects underway that seek to enhance the features of bitcoin or develop alternative approaches based on similar principles.
Celent approximates that bitcoin, Ripple and other decentralised ledger-based solutions may eventually be seen as the protocol for value exchange. “Bitcoin, and especially its underlying technology blockchain, is a marvellous technological innovation. However, in its current form it may never be ready for prime time,” said Zilvinas Bareisis, senior analyst with Celent’s banking group and author of the report. “And that is the challenge for established players today: engaging with cryptocurrencies directly is risky in the short term, but ignoring them altogether might look very foolish in the long term.”
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