Bitcoin’s emergence has been a wake-up call for the financial industry, where executives and regulators see digital currency and blockchain technology as an opportunity to make systems more efficient by eliminating middlemen (See “What Bitcoin Is, and Why It Matters”). But could it do more than that, and transform global finance entirely?
Let’s get payments right first, say two central bankers—both of whom are focused on translating blockchain technology into new tools for central bankers.
“Payments are the foundation of everything else,” Robleh Ali, a research scientist at MIT and former head of digital currency at the Bank of England, said today on stage at the Business of Blockchain conference, an event organized by MIT Technology Review and the MIT Media Lab.
Bitcoin “fundamentally rethought how payments could work,” Ali said. The efficiency of Bitcoin’s blockchain compared with traditional payment systems captured the attention of the finance world.
Beyond payments, central bankers are also interested in the potential of blockchain technology to improve on existing systems of identity verification, transaction validation, resiliency, and security, according to James Cunha, senior vice president at the Federal Reserve Bank of Boston, who joined Ali on stage. But for those things, “there are still a lot of problems to solve,” Cunha said.
Eliminating a middleman means “that person in the middle that you trust and and that you have a relationship with is no longer there,” Cunha added. “You’re dealing directly with another party. That’s a whole different legal structure, and you have to understand what your risk is with that party,” he said. “This is complicated stuff.”
How can parties know for sure that a transaction is final, for example? In today’s system, a wire transfer is irrevocable; the Fed would never reverse it. That’s crucial for users to trust the system, Cunha said. How finality is determined on a blockchain platform depends on its governance structure, which varies depending on the platform. “Efficiency could be great, but what if you’re not sure when those funds are final?” he said. Despite the Fed’s interest in blockchain technology, though, Cunha said it has no imminent plans to issue its own digital coins. At this point, it is focused on understanding the potential risks.
This artist is dominating AI-generated art. And he’s not happy about it.
Greg Rutkowski is a more popular prompt than Picasso.
This nanoparticle could be the key to a universal covid vaccine
Ending the covid pandemic might well require a vaccine that protects against any new strains. Researchers may have found a strategy that will work.
How do strong muscles keep your brain healthy?
There’s a robust molecular language being spoken between your muscles and your brain.
The 1,000 Chinese SpaceX engineers who never existed
LinkedIn users are being scammed of millions of dollars by fake connections posing as graduates of prestigious universities and employees at top tech companies.
Get the latest updates from
MIT Technology Review
Discover special offers, top stories, upcoming events, and more.