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Reasons for banks to invest in Bitcoin and its underlying technology

Why are banks investing in Bitcoin and its underlying technology? Here are the reasons banks are investing in bitcoin technology.

Crypto currency market with a bitcoin
Image: Unsplash

Satoshi Nakamoto, the anonymous Bitcoin creator, published a white paper about his research in 2009, bringing together existing concepts that could facilitate a fair online currency.

The currency is significant because it functions as a decentralized public ledger, allowing people to track assets provably and relatively around the world.

Nobody can modify the transactional ledger without everyone noticing, so it’s a fair way for people to exchange goods and services. Furthermore, the basis of these rules is a consensus, so all users hold the system responsible.

This feature ensures the system’s integrity and allows it to be improved if the improvements benefit the general public.

illustration of a person sitting on a pile of bitcoins
Image: Open Geeks Lab

So far, we’ve seen several of these enhancements, and developers continue adding interesting new elements to Bitcoin every few weeks. First, it’s a dynamic code base.

Another intriguing aspect of Bitcoin is how all network transactions are logged into the blockchain, allowing us to see all transactions’ history in real-time. We can track their movements worldwide, which is helpful for auditing.

However, people can also use it to track the history of a specific token or asset.

For example, if we tokenized cotton, we could see how particular units of cotton could move through a local supply chain and eventually become a finished product.

That is advantageous to many different interest groups for a variety of reasons. And it is something that some have desired for a long time. 

Why have some banks started investing in Bitcoin

mastercard on smartphone with cryptocurrency behind it
Image: KnowTechie

Various financial institutions are hedging their bets and taking Bitcoin seriously. They want to be a part of its expansion.

Blockchain, ledger technology, and digital currencies will play an essential role in these institutional banks.

Investing in some of the early Bitcoin companies gives them insight into how the industry is evolving and access to developed technology. I’m confident they’ll incorporate that technology into their current infrastructure.

If financial institutions have started investing in Bitcoin, why be left out of investing in this powerful technology? Like banks investing in Bitcoin, you can also earn returns by trading Bitcoin.

On the other hand, Bitcoin Bank Breaker is a reliable platform that helps novice traders trade with ease.

How banks can integrate Bitcoin

Banks could use blockchain or a public or semi-public ledger to supplement the current interbank settlement networks such as Swift or ACH.

As a result, banks would reduce prices and compliance risks by implementing blockchain.

Furthermore, because it is a rule-based, protocolized technology, there is much less chance of human error.

Banks could also use Bitcoin in novel ways. For example, they could tokenize a loan and then flexibly and traceably sell it on the market. Or say they want to offer products and services in markets where they don’t currently exist.

For example, assume a New York-based bank wishes to provide services to a community in Southeast Asia. Of course, that would not be easy to do today.

Still, with digital currency, the bank could potentially reach that new market without converting that local community’s fiat currency into the bank’s local currency.

Furthermore, there is security. Bitcoin is at the forefront of cryptographic technology.

By integrating these new concepts, banks would incorporate advanced security features such as public-key encryption and private-key message signing.

As a result, consumer protections would be more robust.

 Would you advise banks to invest in Bitcoin?

phone showing a chart and money coins bills
Image: Pixabay

Many experts would, particularly with large banks. Many have BTC working groups that actively research the technology’s potential. What many experts would advise banks to do is to take it seriously.

We saw what happened to the recording and publishing industries, and the banking industry cannot be far behind. In addition, banks would be wise to integrate some of these technological advances into their business models.

We have success stories like iTunes, Pandora, The New York Times, and Bloomberg — they embraced new technology rather than fought it.

Have any thoughts on this? Carry the discussion over to our Twitter or Facebook.

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