Nine of the largest banks in the world, including the likes of Goldman Sachs, have announced a partnership with R3, a New York-based financial technology firm, to create a framework for the blockchain technology within the financial industry.
The banks have never worked together in this capacity, and they will be working on a way to implement the blockchain technology behind bitcoin, a digital currency, into finance. While developing commercial applications they also will develop standards and protocols so it is adopted more broadly.
At its simplest, blockchain is a digital record of events that is shared among the participating parties. It grows as new completed transactions are added to it, and can only be updated when there's consensus among most of the parties in the transaction, so that makes spoofing it very difficult.
"Our bank partners recognize the promise of distributed ledger technologies and their potential to transform financial market technology platforms where standards must be secure, scalable and adaptable," said David Rutter, CEO of R3, in a statement.
The blockchain technology has expanded significantly over the past year, attracting attention from large banks, which suggest the technology could save them money by speeding up their operations and making them more transparent.
The project is the result of a year's worth of consultancy with R3, and will be led by Rutter. The nine banks involved, along with Goldman Sachs, include Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, JP Morgan, Royal Bank of Scotland, State Street and UBS. These banks seem to have realized the need for an alliance in order to properly coordinate their efforts in blockchain technology.
Blockchain is basically the system in which all of the transactions for the digital currency bitcoin are stored and verified. What makes the technology interesting, especially for banks, is the fact that blockchain can store other data as well, such as transaction ownership, along with the transaction information. This makes it a faster and more secure way of recording transactions. It is likely that the partnership will result in finding a way to use blockchain across a range of financial activities.
The partnership is certainly interesting, and reflects the interest that banks have in blockchain technology.