What is Blockchain?
Blockchain encompasses a set of technologies that allow the secure registration of information through transactions processed by a network of nodes, which replicate the information in a consensual way creating synchronized copies and guaranteeing through cryptography that the data once registered cannot be modified or removed.
Blockchain networks also allow the deployment of programs (Smart contracts) that can interact with the stored information, implementing predefined business logic agreed between all the actors that manage the network. This allows substituting or complementing processes that typically require trust in an intermediary, avoiding the need for third parties and guaranteeing that no actor can affect the consensual operation, maliciously or by mistake.
Why Blockchain?
Blockchain is a technology initially designed for the needs of cryptocurrencies, enabling the digital exchange of value in a completely decentralized network and without the need for an administrator or central figure to guarantee the value exchanged or the identity or reliability of the participants in a transaction. When we apply blockchain to the business world, we are discussing designing trusted networks on which business relationships are built.
Central bank cryptocurrencies and private cryptocurrencies: pros and cons
A priori, if a central bank ends up issuing a cryptocurrency, and it has a well-defined regulatory framework, and there are no doubts about its security, it will likely be accepted as a form of payment in widespread use. Being backed by a public institution that cannot fail, the mere fact that a part of the savings and transactions happens to be carried out with the “crypto” version of the currency should not affect the value of the said currency. On the other hand, private cryptocurrencies find it more difficult to maintain a stable value since this depends, among other factors, on the degree of acceptance or use they have, and, as this can change suddenly, its value is usually more volatile.
In any case, proposals are appearing that try to circumvent this disadvantage. The so-called stablecoins or stable currencies seek to overcome this obstacle by fixing what would constitute a fixed exchange rate between the cryptocurrency and an asset of stable value (such as a currency of an advanced country). Libra, the cryptocurrency proposed by Facebook, is within this family of cryptocurrencies.3
It is often argued in favour of the development of central bank-backed cryptocurrencies that could complement traditional monetary policy tools. For example, setting an interest rate on digital currency would expand the range of instruments available to the central bank.4
However, the introduction of cryptocurrencies issued by central banks would also present risks since they could contribute, at least in part, to the disintermediation of financial activity:
If part of the bank deposits of households and companies were converted into cryptocurrencies not managed by financial intermediaries, the supply of funds available to grant credits would decrease. This would tend to make credit more expensive and give a greater role to central banks as structural providers of liquidity to the system. The existence of these central bank cryptocurrencies would increase the volatility of flows between bank deposits and cryptocurrencies in times of uncertainty or doubts about a financial institution's soundness, which would cause a risk to financial stability. The degree of financial disintermediation critically depends on who is hosting the cryptocurrency digital wallets. If hosted by the central bank, individuals could have accounts directly with the central bank, increasing the risk of disintermediation and financial instability. They could also be hosted by entities unrelated to commercial banks; This would not eliminate financial intermediation, but it would pose significant challenges: how would these entities be regulated? Would a deposit guarantee protect the purses?One of the words computer scientists use the most to make jokes about marketing people is blockchain. This term has become one of those sonorous words that designate the technology behind a project that few can explain well, but that sounds very advanced and serves to sell a project better.
It shouldn’t be because blockchain is a very powerful and real technology that has opened unthinkable paths. It has made decentralized and secure models between participants who do not trust each other possible. It is the first time that humanity can have currencies without a central authority. This implies in terms of models of society and changes in structures in finance and logistics.
The extension of a digital money system would save a large part of costs: the financial industry spends 80,000 million dollars annually to make secure transactions possible, according to Marta García Aller in “The end of the world as we know it.”
Since 2008, after the enigmatic figure of its creator, Satoshi Nakamoto, the emergence of Bitcoin and cryptocurrencies have been sounding more and more, and blockchain, the technology behind all this, became the promise of a decentralized, safe and secure world. Transparent.
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Faced with the transaction revolution, banking has become one sector that has invested the most in this technology. Facebook put banks on alert when it announced Libra, its global cryptocurrency, although, in recent months, it has changed its strategy to turn it into a currency linked to the local currencies of each country in which it operates as a payment platform. More a Paypal than a bitcoin.
China has taken the lead over other countries and has long developed its official cryptocurrency, called DC / EP (Digital Currency / Electronic Payment). It is based on un blockchain created by the People’s Bank of China, centralized and social control. The World Economic Forum, in a report, announces that 2020 could be the year we have the first global virtual currency.
Why don’t we talk about blockchain anymore?
But the enthusiasm for innovation seems to have waned. According to Antonio Fernández Anta, a blockchain research professor at IMDEA Networks, what is happening is that it is no longer a technological novelty and following the Gartner curve, which is used to measure commercial maturity of a technology, we are coming down from the peak of expectations.
