Key takeaways

  • Blockchain is a new paradigm for recording transactions: decentralising databases and adjusting the notion of ‘truth’.
  • Bitcoin made blockchain famous but its potential extends far beyond the cryptocurrency.
  • Major financial institutions are teaming up to implement blockchain.

While general opinion is divided as to whether the controversial digital currency bitcoin is here to stay, 2015 certainly saw bitcoin use take off. However, it’s the remarkable technology underpinning bitcoin – the blockchain – that’s causing great excitement among big businesses. And if you imagine that all this has very little to do with you, think again: your bank could soon be using the technology to manage your money.

In fact, banks are at the forefront of embracing blockchain. As reported in the Sydney Morning Herald, the Bank of England’s response to blockchain last year was that “most financial assets today exist as purely digital records. This opens up the possibility for distributed ledgers to transform the financial system more generally”.

The chief executive of Westpac recently called the technology “more of an opportunity than a threat” and although his bank hasn’t signed up to it, the R3 consortium, which started only in September 2015, has attracted 25 of some of the world’s biggest banking institutions – including HSBC, NAB and Commonwealth Bank of Australia – to look at standardising the use of blockchain in the financial services.

Why the excitement over this new technology?

A beginner’s guide
to blockchain

Having risen to prominence as the system behind bitcoin, blockchain is regarded as a secure and transparent way of maintaining and transferring digital assets.

Traditionally, the ‘truth’ of a transaction is stored with a limited number of providers. Take, for example, a credit card purchase. Your credit card statement would provide a record of the transaction – yet this rests with just one provider. How can you be absolutely certain that the information is correct?

Blockchain challenges this foundation by creating an open, publically verifiable system of recording transactions.

The system is based on three concepts:


Also known as a ‘distributed ledge,’ imagine a traditional ledger as a single database for recording economic transactions; a blockchain differs in that it’s a distributed database – duplicated records are shared between a number of participants. That way, each participant maintains a consistent picture of the current state.


Every transaction is cryptographically ‘signed’, which prevents third parties from being able to tamper with it.


A transaction is added to the ledger only if a majority agrees to include it. If the consensus is to include the transaction, all copies of the ledger are updated.

what is it good for?

Currently, the technology is famous for its role in cryptocurrencies such as bitcoin. The fervour for it, however, lies in its simplicity and robustness: it can be used for almost anything that requires a set of processes that require security, consistency and uniformity.

As a result, it’s not just the banks showing interest. Major organisations are investing in the technology, too.

The Nasdaq exchange will soon start to use a blockchain-based system to record trades in private companies. ‘Smart’ contracts is another application: IBM is planning to release open source software that uses blockchain technology to create secure, digital contracts. Meanwhile, Microsoft has launched a cloud-based blockchain platform to enable financial institutions, including insurers, to experiment further with the technology.

While there are still some unanswered questions surrounding blockchain, it appears to be steadily taking root in our future digital economy – cashing in on its own, strong and resilient currency: digital trust.

Want to know more about the fintech opportunities with blockchain? Read PwC’s Banking Matters Hot Topic paper here.

This article was co-written by Tan Allaway and David Cummins.



Tan Allaway

Tan Allaway is a former editor of PwC’s Digital Pulse.

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David Cummins