The rise of global digital currencies

Posted: 1 February 2017 4:43 pm

bitcoin in copy image

What will blockchain technology and the inevitable rise of digital currencies mean for the investments around the world? speaks to Fran Strajnar, BraveNewCoin Co-founder and CEO, to find out.

Technological innovation and changes to the way we manage our money go hand in hand. Throughout history, technology has always been a driving factor in transforming the way we pay for purchases and send money, mobile banking being the most recent example.

The next development that looks set to reshape the fintech world is blockchain technology, which provides a secure and transparent way to record digital transactions. But what exactly is blockchain technology and how will it influence digital currencies and a wide range of other industries and services?

Blockchain explained

Blockchain is a distributed digital ledger which provides transparency when recording digital transactions. Its decentralised nature makes it highly secure, while the fact that it records a continuously growing list of transactions means that blockchain can be used to prove who owns what at any point in time.

Developed in 2008 to track digital currency bitcoin, blockchain technology was quickly recognised as a game-changing technology by a wide range of governments, banks and fintech businesses. One such business was blockchain data company BraveNewCoin, the Melbourne-based provider of blockchain and digital assets data and research.

“Several years ago we realised that blockchain technology has created a new asset class,” explains Fran Strajnar, BraveNewCoin Co-founder and CEO. “First there was bitcoin, which represented the dematerialisation and digitisation of currency. Now we are seeing all sorts of value digitised, from bonds and commodities to real estate and intangibles like brand equity and intellectual property. We asked ourselves, ‘What's it going to take for this new asset class to go mainstream?’ and proceeded to build a blockchain data company to track and develop the new asset class.”

Integrating blockchain

BraveNewCoin now delivers a wide range of blockchain solutions across a variety of industries, helping businesses build next-generation applications that utilise blockchain technology.

“We build spot pricing, indices, analytics and blockchain tools,” Strajnar explains. “The world's largest inter-dealer brokers distribute our pricing products to the global forex community. This helps get exposure to bitcoin and the blockchain-based asset class. In turn our products are then used to create new instruments and securities products.”

For example, an asset manager may use BraveNewCoin’s Bitcoin Liquid Index (BLX) as a reference price to settle derivatives trade against. App developers may use BraveNewCoin’s digital currency exchange rates for in-app currency conversion or a variety of other uses.

However, integrating blockchain into existing systems is often far from easy. “Which blockchain? Which application? What problem is being solved? Blockchain integration stretches from business considerations, right through to conceptual solution design and finally technical considerations,” Strajnar says.

“One of the biggest areas of focus for the whole sector is middleware or inter-operability tools so after we have a commercially viable solution designed, we can integrate and get all that wonderful programmability and efficiency from a blockchain into conventional systems.”

The digital currency revolution

Despite the many potential uses and applications of blockchain – including everything from electronic voting to transferring the ownership of shares – Strajnar still rates bitcoin as the most interesting and important application of the technology.

“As much as many people still hate to admit it, bitcoin is the 'Killer App'. The implications of a truly digital currency transcend geographic, cultural and political boundaries and pave the way to transforming everything from cross-border payments, remittance, to banking the un-banked,” he says.

Of course, bitcoin is still a long way off being adapted into the mainstream, but banks and financial institutions around the world have long been aware of the implications of blockchain technology for digital currency. In 2016, CommBank partnered with several other global banks to test the efficiency of blockchain technology, while Westpac and NAB joined the network of global fintech provider Ripple, with an eye to using blockchain for payments and settlement.

More recently, Bank of China and HSBC made headlines when they were looking at ways blockchain technology could improve everything from cross-border payments to property valuations.

Right around the world, there are scores of banks and financial institutions exploring the benefits of blockchain. The outcome of the banking revolution remains to be seen, but Stranjar believes one thing to expect is the creation of state-issued digital currencies.

“People’s Bank of China Coin (PBOC-C), a digital Yuan, is already in the pipeline. We will see a CitiBank Coin. We will see Starbucks rewards move to a blockchain simply because of the efficiency and inter-operability gains in doing so,” he says.

“Blockchain technology has far-reaching implications well beyond finance; however, finance is the biggest incentive to transform with this technology. Core banking, central banking, international payments, post-trade settlement, supply chains, etc are all being explored with blockchain technology.”

And the changes this will lead to are expected to be huge.

“The end result is a set of standards and protocols for end-to-end standardisation of any type of value transfer,” Strajnar says. “A completely integrated, seamless financial architecture is evolving. I would go as far as calling it the well overdue Financial Renaissance we've all been waiting for.”

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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