Blockchain technology, the basis on which the digital currency Bitcoin was created, is likely to become the backbone of the future digitalization of money.
Speakers at the 16th Annual International Conference on Policy Challenges for the Financial Sector said as much throughout the three-day convention which occurred June 1-3 in Washington D.C.
The event underscored the growing presence of Bitcoin and other digital currencies. That's because this technology offers a potentially higher level of security in transactions. The companies behind digital currencies may also offer investors opportunities.
Representatives of the major central banks worldwide attended the conference, which was sponsored by the Federal Reserve, the World Bank and the International Monetary Fund. FinTech was the focus, and experts spent the first day discussing blockchain technology, which is the framework for the popular digital currency Bitcoin.
Fed Chair Janet Yellen, who spoke at the event, encouraged bankers to learn about the technology.
"Central bankers don't normally like the word disruption, but it's not something to fear," Yellen said.
Perianne Boring, the president of the Chamber of Digital Commerce, said that Yellen's comments and the interest in digital currency showed that the technology had "reached the highest levels of society and government."
A blockchain is a digital ledger of transactions that have been executed. New data continues to be added in a linear, chronological order through the completed blocks of data which are shared among computers on the network.
Participants on the network use cryptography to edit the ledger online without the involvement of a central clearing authority. This ledger contains all the data of transactions from the start of the first block to the latest block.
Because there is no necessity for a centralized authority to oversee the transactions, the blockchain creates a transparent, simple and fast transaction environment. As the data are available to all members and any modification requires the permission of the majority of the members, it is better equipped to handle potential cybercrimes.
As no one can bypass the rules, the members are assured that no single authority can deviate from the protocols. Due to direct transactions between two parties, transaction costs are negligible.
The inter-bank transactions, which take days, can now be cleared in a matter of minutes, 24/7 and without the restrictions on working hours.
"Soon, the phrase 'cross-border payment' will make about as much sense as 'cross-border email,'" said Adam Ludwin, co-founder and chief executive of the blockchain-focused start-up Chain, during his keynote address.