Simply put, blockchains are distributed databases build with open-source code. However, they could disrupt the financial services industry - or transform it, depending how the technology is approached.
Basically, the blockchain technology is a decentralised, non-alterable database systems that is coordinated over a peer-to-peer network. Thereby, no central authority is needed. There is no powerful intermediary required to authenticate users or settle transactions. Instead, the system works permission-less, i.e. parties don’t need to know and trust each other to manage their transactions fast, securely and cost effectively.
However, there have been problems with the technology. Bitcoin, the digital currency and largest blockchain, was used to pay anonymously for illegal activities and some exchanges failed. However, those problems are also known in traditional financial services, note the speakers of the Societe Generale Securities Services conference on blockchain in Frankfurt, and point out legal, regulatory and governance issues to be settled for the new technology.
The panel at Societe Generale Securities Services conference thereby advices everyone to “think big, start small but start today.” While the first use cases are already published, standards are likely to emerge in three to five years.