Banking and Blockchain Technology Essay

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Blockchain technology is an innovative addition to the financial market. What began as a brainchild by the people or person known as ‘Satoshi Nakamoto’, blockchain technology has evolved and become something far greater than most would have imagined. Blockchain technology allows for digital data to be distributed (not copied), allowing for it to become the foundation for a new kind of internet. Businesses have used the technology to implement the use of digital currency like Bitcoin and promote growth of blockchain companies. Some of these successful blockchain companies are: Aeternity, Bitfury, DFINITY, ContentKid, and Blockphase. These companies represent the future of blockchain technology and how far it will go.

Background: What is Block-Chain Technology?

A recent innovation within the financial world, the mastermind behind blockchain technology is ‘Satoshi Nakamoto’. He is the pseudonym for a person or a group of responsible for developing, authoring, making, and deploying bitcoin, bitcoin white paper, and bitcoins original reference implementation in 2008 (Okrant, 2018). Through that implementation, the first blockchain database was formed. Such actions also led to solving the doubles-spending dilemma associated with digital currency via the use of a peer-to-peer network. But what is blockchain? Originally known as block chain, blockchain represents a continuously growing list of records or ‘blocks’ secured and linked through cryptography (Okrant, 2018).

Blocks often contain cryptographic hashes of previous blocks, transaction information, and a timestamp (Kelly, 2015). Blockchains are naturally resistant to modification of the information. Blockchains can record transactions among two different parties as an open, distributed ledger in a permanent and verifiable way. When used as distributed ledgers, blockchains are validated and managed through a peer-to-peer network. After the data is recorded, there is no possibility of retroactively altering the block without changing subsequent blocks. To do so means collusion of network majority (Kelly, 2015).

Blockchain technology is secure by design, exemplifying high Byzantine fault tolerance with a distributed computing system (Kelly, 2015). Due to the security and stability of blockchain technology, it can be suitable for medical records, identity management, voting, food traceability, and recording of events. Serving in its initial stages as a public transaction ledger for bitcoin, it has led to innovations and creations of companies specializing in blockchain technology.

Status of Block-Chain Technology

The current status of block-chain technology revolves around digital currency. Although blockchain technology can be used for medical records and a slew of other processes, currently, it is seeing growth in the domain of digital currency. Digital currency has become popular because it is backed not by a bank, but by a secure network, removing the need for banks and the various privacy concerns related to banking (). Digital currency can be bought, sold and traded. They function like stock in a company and led to the ‘bitcoin bubble’. The bitcoin bubble led to the price of Bitcoin soaring up as high as $19,511 or more, before plummeting to $6,750 in mid-April of this year. “The cryptocurrency has fallen more than 65 percent since peaking in December at $19,511. Bitcoin rose 2.2 percent to $6,750 on Monday” (Wolf, 2018).

So many people are interested in replicating the success of bitcoin during its meteoric and fast rise, that other digital currencies have been created. Furthermore, many companies have become accepting digital currency, with the most popular option being bitcoin. Some companies that accept bitcoin are Expedia, Microsoft, and Overstock (Heston, 2018(. Other digital currency competitors to bitcoin are Ethereum, ripple, and BitcoinCash. Ethereum was developed by a small team of co-founders in 2014 and ripple was developed by Chris Larsen and Arthur Britto in 2012. BitcoinCash came later in August of 2017 by the Bitcoin Unlimited group (Heston, 2018)

For those wishing to buy, sell, and trade cryptocurrencies, they can do so in the crypto exchange. A stock market similar to the NASDAQ, popular crypto exchanges are kraken, GDAX, and BINANCE (Heston, 2018). Tech pioneers, teenagers, and venture capitalists have invested and enabled cryptocurrency to thrive. Some example of these investors is Eddy Zillan, Peter Thiel, and the Winklevoss Twins. Eddy Zillan for example, invested his entire life savings of $12,000 into Ethereum and other similar currencies and made a return on investment of $350,000. From there he founded an investment advice company (Heston, 2018).
Many examples of him exist and have led to other investment strategies like crypto wallets.

What crypto wallets due is store owned cryptocurrency so that it can be used for future purposes like trading or making purchases. There are various crypto wallets like a desktop wallet, paper wallet, hardware wallet, and online/mobile wallets (Mavadiya, 2017). Because of the various features of a blockchain network like decentralization and making data inherently public, it put security into a seemingly insecure concept. While future uses for the finance world could include blockchain technology in other areas, for now the focus is on digital currency.


Some recent innovations seen in blockchain technology aside from digital currency is in healthcare and government with MedRec aiming to managed medical record access through the Ethereum blockchain allowing doctors and patients to access and share medical records across various providers (Heston, 2018). There will also be the option for user data authentication for secure medical records. Regarding government blockchain technology use, Dubai began the initiative to implement blockchain methods to increase government efficiency through the digitization of 100 million documents. Dubai also aims to generate and revitalize business and improve travel for foreigners through digital and secure travel documentation like licenses and visas (Mavadiya, 2017).

People wanting more uses for blockchain technology believe its implementation will reduce regulation as well as increase anonymity. People aiming to invest, spend, or make transactions may want absolute privacy and look to cryptocurrency for this privacy or the general blockchain technology. For example, one does not need identification to use and trade cryptocurrency. Transactions are untraceable and fungibility averts blacklisting by exchanges and vendors (Mavadiya, 2017).

However, cryptocurrency has its downside. Some people have fears of its use believing it to be illegal or have not heard of the new technology. Furthermore, there have been hacks of cryptocurrency exchanges with the most recent happening in Coincheck in January of 2018. The resultant hack ended with $530 million lost of the NEM cryptocurrency (Heston, 2018). Another hack occurred in June of 2017 and resulted in $7 million dollars lost from Ethereum and bitcoin. Bitcoin lost another $65 million in August of 2016. Such attacks show how easy it is to steal vast amount of money in a relatively short period of time.

When it comes to long-term viability of cryptocurrency and the subsequent use of blockchain technology, cryptocurrencies have been shown to be amazingly volatile. Within less than a year in 2017, Bitcoin for example, saw A 1,900% increase but then in 2018, crashed to $6,000. While there is hope that stability will arise, increasing cryptocurrency claim prices, the current state of cryptocurrency is an erratic one and therefore may see a decline in the future.



Various companies exist that fully use blockchain technology. One of them is Aeternity. Existing as an open-source, digital asset, and blockchain-based platform, the company builds upon and modifies the decentralized cryptographic peer-to-peer technology (Pimental, 2018). This means allowing real-world data to interface via decentralized ‘oracles’ with smart contracts. Aeternity offers the ability to execute scripts with a virtual machine by using decentralized global networks consisting of public nodes that maintain the blockchain (Pimental, 2018). The AE toke or ‘aeon’ is the balue token for the company and can be transferred among participants for computations performed. The use of tokens thwart spam on the network at the same time allocating computation time and storage proportionally to the incentive-based request.

The core of Aeternity is written in Erlang, providing stability through its fault-tolerant language. For those looking to data-mine even on smart phones, the ‘Cuckoo Cycle’ mining algorithm improves the ASIC problem by offering great decentralization potential. New developments for the company regarding blockchain technology involve state channels. They are spin-off of the concept of payment channels (Pimental, 2018). Sometimes the need arises to have privacy during signed transactions and thus state channels offer that option. The design of state channels allows for off-chain verification of smart contracts as well as data.

Blockchains are great for prediction markets because of the potential to harness the wisdom of crowds in a transparent and decentralized way. Users can generate oracles through posing a question or making a statement......

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Blockphase. (2018). Home. Retrieved from

DFNITY. (2018). DFINITY - The Decentralized Cloud. Retrieved from

Heston, A. (2018). Bitcoin Investing: An Introduction to Cryptocurrency and How to Invest in Bitcoin. PublishDrive.

Hlubi, S. (2018). Cryptocurrency The present and the future!

Kelly, B. (2015). The Bitcoin big bang: How alternative currencies are about to change the world. Hoboken, NJ: Wiley.

Laurence, T., & Wiley Publishing, Inc. Staff. (2017). Blockchain for Dummies. Somerset: John Wiley & Sons, Incorporated.

Manning, J. (2017, September 3). How Blockchain Is Changing the Banking Industry. Retrieved from

Mavadiya, M. (2017, August 22). Blockchain, Bitcoin And Ethereum Explained. Retrieved from

Okrant, R. (2018). Bitcoin Mania: Understanding the Crypto Financial Market Using Technical Analysis. Cork: BookBaby.

Pimental, D. (2018, May 23). Blockchain Firm Aeternity Launches Starfleet Incubator - BlockTribune. Retrieved from

Scott-Briggs, A. (2018, January 12). 5 Blockchain Pioneers to Watch in 2018. | TechBullion. Retrieved from

Wolf, J. (2018, April 9). Bitcoin, the Biggest Bubble in History, Is Popping. Retrieved from

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