Money will be decentralized, possibly thanks to blockchain

When moving money from one bank to another it can take two days for the transaction to settle. International transfers may take weeks. We can watch live video streams from people on the other side of the planet on our mobile phones, but our financial IT systems are still incapable of moving money instantaneously. Banks are still running software and hardware built in the 80’s. This is the situation we’ve come to accept even though there is simply no technological reason for it in 2016.

Financial institutions progress very slowly. The technological, organizational and cultural friction is overwhelming. There’s just too much risk and very little incentive to move faster. Banking is a very profitable business as it is.

In 2008 bitcoin introduced blockchain, a way for transactions to be completed in minutes. What makes it even more interesting is that there is no need for banks or any other intermediaries. Money (or other assets) can be moved directly from one person to another, reliably and safely.

Regardless of whether bitcoin is a viable currency the idea and the technology behind it is impressive, to say the least. The original paper on bitcoin is a though-provoking read.

Bitcoin is just one implementation of a blockchain. There are many others and there will be many more. The technology is new and there’s a lot of issues that need to be solved and learned from. A lot of mistakes will be made. There’s also a lot of opportunities yet to be discovered.

I’m starting to be convinced that blockchain was the crucial innovation that will lead to the decentralization of money. Billions of dollars will be spent in preventing and slowing down this change. It will probably take tens of years. Yet I’m beginning to think it’s inevitable.

Money needs to be decentralized. And it will be decentralized.

If you want to look into the topic in more depth you may want to listen to my podcast interview with Martti Malmi, the second person to work on bitcoin.