Bitcoin's underlying technology offers capabilities that current financial systems lack. Supporters argue that peer-to-peer protocols could supplant banking intermediaries altogether, since transactio
Bitcoin's underlying technology offers capabilities that current financial systems lack. Supporters argue that peer-to-peer protocols could supplant banking intermediaries altogether, since transactions wouldn't require a trusted middleman. But banks responded to this threat by pouring billions into centralized blockchain projects of their own, hoping to harness the technology without surrendering control.
That strategy hasn't worked. Financial institutions still can't figure out how to turn blockchain into a viable product. Andreas Antonopoulos, a bitcoin and security expert, traces the failure to a misunderstanding of how bitcoin operates. Bitcoin's ledger depends on multiple technologies working in concert: Schnorr signatures, advanced elliptic curve applications, and ring signatures among them. Strip away any of these components, and the system breaks.
"For banks, Bitcoin is a very very difficult bitter pill to swallow," Antonopoulos said during a presentation at the EMEA Fintech Talks conference run by Deloitte. "The idea that banks are simply going to do a bit of blockchain and fight this disruption is ludacris on its face. Because doing a bit of blockchain doesn't serve the other six billion. Because doing a bit of blockchain doesn't unleash a torrent of innovation that comes from open protocols and open access, because most importantly, a bit of blockchain with a centralized counter-party in the middle of every transaction takes us right back to the world we are living in today."
The banking industry followed a predictable path. First they rejected bitcoin outright. Then they embraced blockchain technology as a way to compete. Now, as bitcoin grows into a major financial network with substantial market capitalization, they face a reckoning.
Some large financial firms have started to adapt. Goldman Sachs and JPMorgan moved to adopt and integrate bitcoin into their operations. Fidelity Investments went further, dedicating resources to test mining software, layer-two solutions, and off-chain applications. Other banks continue to resist, betting they can outlast the disruption. The outcome remains uncertain. Open-source technologies and bitcoin represent an existential challenge to how the banking establishment conducts business.
The financial sector is fighting back in another way. Ed Pownall, an executive at Coingeek.com, told The Mirror that banks are working with major media outlets to distribute false information about bitcoin and the cryptocurrency space. Banks view bitcoin as an existential threat, he argued, and they're taking active steps to undermine it.
"A concept as disruptive to the banking sector status quo as Bitcoin has translated into considerable resistance to its very existence, and therefore, we know that many have an agenda to kill it at birth. As a result, they feed the media, who may not fully understand the ins and outs of this very complex currency, with incorrect information in order to create doubt and uncertainty," Pownall said.
For major financial institutions and their stakeholders, maintaining the status quo remains paramount. The rapid expansion of bitcoin, cryptocurrencies, and decentralized technologies is making that task harder with each passing month.
