Sunday, 23rd October, 2016
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TL;DR The innate characteristics of credit unions give them an advantage in the race to implement the blockchain across a broad sector. That could trigger a complete overhaul of the financial industry. (Read more in THE TAKEAWAY below.)
TOP 5 STORIES ON COINDESK Hungry? Walmart aims to grab a bigger slice of the (pork) pie in China with a blockchain pilot that aims to track pig products from farm to shelf. The objective is more reliable food safety. IBM and Beijing’s Tsinghua University are involved. Steaks are high.
R3 is working with a publicly traded digital currency. In a surprising trial involving 12 of its member banks, the consortium tested international payments on the back of Ripple’s digital currency XRP. Could this herald a shift away from custom blockchains toward incorporating existing systems? Read more.
Insurance gets the blockchain treatment. Not to be left out, five major insurance and reinsurance firms have formed a consortium. B3i, as the project is known, will explore blockchain applications in the hope of improving sector efficiency and transparency. Reassuring.
Not again. It’s starting to feel like we’re in a tense Hollywood thriller. Ethereum’s hard fork this week went according to plan, but the attacker(s) simply switched gears. An imminent second hard fork is expected to thwart the current round. And then?
Some assembly required. Symbiont launched its “off-the-shelf” blockchain service for enterprise. It boasts containerized code and a streamlined consensus system for rapid smart contract deployment. If you’re not sure what all that means, read this.
More Blockchain News →
QUOTE OF THE WEEK “...blockchain evangelists often claim to offer something new and revolutionary but what they actually describe often involves reinventing the wheel. Maybe this wheel has advantages over existing wheels, but it’s still a wheel.” - Craig Pirrong, " A Pitch Perfect Illustration of Blockchain Hype", CoinDesk |
THE TAKEAWAY
You wouldn’t expect credit unions to be a hotbed of innovation. As far as I know, they don’t have labs, incubators and hackathons. And yet that sector could be where blockchain efficiencies finally go mainstream.
It could also be where the redrawing of the financial sector as a whole begins.
The fact that credit unions are looking at the blockchain is no longer news. In the US, they have their own consortium doing research and working on prototypes. This week we reported that DCU, New England’s largest credit union in terms of assets, joined the Chamber of Digital Commerce. Both of these developments show an increased awareness of the need to adapt to changes in technology. And given the sector’s reach – in the US alone they serve almost half the population – the potential for broad deployment is significant.
But let’s step back and take a look at the bigger picture.
What we have here is a sprawling network of savers and borrowers, grouped by geography or collective into associations which themselves often form associations. Collaboration is in their DNA.
Also, their not-for-profit status means they have little need to protect their competitive advantage, so they are naturally more open to sharing technology and pooling resources than other areas of the financial industry.
This makes them more likely to become the first sector in the field to uniformly adopt a new technology standard.
Another consequence of the sector’s not-for-profit status is that efficiency improvements are more likely to get passed down to the users (while banks generally focus on rewarding shareholders). Combine this with the fact that many credit union members are small savers, and you can see that here, finally, we have a sector in which this new technology can have a direct impact on family budgets.
A broad base of participants, innate collaboration and economic benefit: where could this take us? Looking forward, we start to see the potential for the credit unions to bring about real financial change with blockchain.
Imagine a credit union digital currency, exchangeable for goods and services from affiliated businesses, with embedded incentives and rewards. Or, imagine the credit union network evolving into a decentralized P2P lending platform. Lower overheads will bring even greater flexibility and potential profit for the members, which will encourage further innovation and collaboration. With some brainpower and a few whiteboards, sector leaders and collaborators will no doubt come up with new financial products that harness the advantages and spread the benefits. It’s not hard to see the potential for this sector.
Could credit unions go from being the little David of the financial industry to the Goliath with big muscles? Could they be the first to spread blockchain use across demographics? Or will coordination across such a broad sector prove too complicated to overcome the obstacles to implementation?
– N
More background:
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OTHERS ARE TALKING ABOUT...
Bloomberg sounded surprised that blockchain trials were popping up all over the place. We understand, it’s hard to keep up. Motherboard had an interesting account of the Clinton campaign's lack of interest in bitcoin. And Reuters’ article about how European banks are lagging Wall Street in the blockchain race highlights the overall weakness of the sector.
The Wall Street Journal carried a puff piece on blockchain potential written by one of Coinbase’s founders. Ebony had an article about a bitcoin-based payments startup that used the phrase “decolonize your life”. I’d never heard that before. And The Register flung some hilarious shade at the idea of music on the blockchain.
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