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The Digital Disruption of Money

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If your company sells to financial institutions, you need to know about the upcoming tech disruption of the business of... money.

While the Twitterverse debates whether Craig Wright is the mysterious founder of Bitcoin, Wall Street gathered at Nasdaq for a secret meeting that would make every bank a Bitcoin look-alike.

Bitcoin demonstrates how effectively "blockchain" technology can create a virtual currency. But banks (and the governments that collude with them) can't abide by the anonymity of Bitcoin.  

In the sense that Bitcoin is not suported by a government central bank, it is more like "gold" than a currency from a banker's point of view. In fact, Bitcoin's are digitally "mined" into existence.

Now financial institutions want to replicate the technology behind Bitcoin and adapt it to create the digital transformation of money.  The meeting in New York was created by a San Francisco company, Chain, who could become the next software Unicorn by its re-engineering of the stodgy world of finance.

Maybe you thought today's money transfers were digital, yet major financial institutions (who were early adopters of mainframe computing) have barely entered the digital era. And in an era where even the automobile industry faces a software-driven re-engineering (driverless cars)... the financial sector is ripe for change.

While cash in bank accounts moves electronically all the time, today's electronic payments are only messages saying that cash needs to move from one account to another. This requires a reconciliation which adds time to the payments process (moving money between accounts can still take days as banks wait for confirmation.)

In the new world of digital cash, digital dollars are pre-loaded into a secure digital system like a blockchain. From there, they can be swapped immediately for an asset. Instead of a record or message being moved, it’s the actual asset. (We are talking "dollars" here because this is a US group but the same transformation will come later to euro, yen, yuan, ruble and others.)

That's what Chain Open Standard, an open-source blockchain platform, would allow the financial industry to do. It would free up hundreds of millions of dollars by putting their cash transactions on a digital superhighway instead of on today's back streets.

Chain Open Standard

With this digital transformation will come an enormous opportunity for solution providers: a technology refresh that will roll over the financial vertical all at once, a giant traffic jam of tech change. 

How far away is this digital disruption? Not this year but within 5 years. 

For example, this meeting, with more than a hundred top financial executives (people like the CTO at Fiserv, a transaction and payments company with more than 13,000 clients and similar executives from Citigroup, VISA, Fidelity and others), was not "hypothetical."

This private meeting (Bloomberg actually called it a "secret" meeting) showed the bottom line impact of software engineering: U.S. dollars were transformed in front of their eyes into pure digital assets-- a digital dollar created on a block chain (a credit) and spent (a debit). Proof that their collaboration with Chain works.

For those familiar with Bitcoin, which performs this type of operation every hour of every day, you might ask yourself: "Why is this a big deal? Why is this different than Bitcoin?"

The answer: Because they will control it.

Go Bloomberg on Secret Meeting