Banks and Blockchain Technology

Banks are taking notice of Blockchain!

Two days ago:  http://www.bbc.com/news/business-35370304

This week:  http://r3cev.com/press/2016/1/20/r3-brings-eleven-major-global-financial-institutions-together-on-a-cloud-based-distributed-ledger

Today:  http://www.pionline.com/article/20160122/ONLINE/160129944/11-banks-complete-experiment-using-blockchain-technology

Links looking at banks and blockchain abound.  This is a search on the last month.

Blockchain can be a public or private extended ledger. 

Yes, blockchain is a valuable accounting method.  That is obvious to Banks.

This is a roundup of what Big Banks are saying about Blockchain.

China likes it:  http://forklog.net/peoples-bank-of-china-intends-to-create-a-digital-currency/

Wonderful!

The world banking system is a debt based money system.  Banks create money from nothing by loaning it into existence by means of writing a number in two balancing accounts.  While it is in existence Blockchain technology is a more efficient way to manage the accounting problem not only for money but so many things related to what money does. 

Bank loan money is extinguished as repayment reduces both sides of the account balance sheet to a zero balance.  Then the loan account becomes a history record.  What existed as money in circulation during the life of the loan becomes non-existent upon loan payment.

Banks being banks and having a well entrenched legacy banking system.  It is all structured on a debt based system by which they loan money into existence and extinguish it over and over in a loan cycle process.

Public ledger blockchain, at least in its current system structure, goes on forever.  Digital currency is introduced into the system by its first transaction as a medium of exchange.   Unlike the bank loan contract to repay over time.  The first acceptance of a digital blockchain currency as a medium of exchange is its very first transaction.  Every transaction after that in the blockchain is validated.

I will bet any amount of money on this:  In the high level architecture model of banks adopting blockchain technology there will be, without a doubt, the continuation of a legacy system of extinguishing loaned money as the loan is repaid according to legacy balance sheet account concepts.

That is counter to the concept of a perpetual blockchain open ledger.  That is why it must be a private bank blockchain to preserve the fundamental debt based money scheme of the banking system. 

If Blockchain digital currency (which is really transactions related to money amounts) does not go out of existence with the repayment of a loan then they (and linked currency amounts)  continue to exist after the loan is repaid.  They become "loanable funds"

That is a very different ball game.  One that is half way to a positive based monetary system.  The need for "fractional reserves" can be phased out. 

However, the need for money supply management continues.  Transition to a positive money based blockchain system has extremely significant implications for how that system is to be managed and even greater implications for exactly who will manage it.

I think the Banking System will not have their Blockchain cake and eat it too. 

Blockchain is a Trojan horse that the Banking system is smart enough to see coming and erect defenses to protect its world wide debt based money system.  Once blockchain technology is introduced the next logical step is to convert to a positive money based system.  In that system once blockchain currency is introduced to the monetary system it never goes out of the system.  It is managed by sidelining it in a limbo account to regulate the money supply. 

The blockchain of transactions never ends.