Why do BANKS like BLOCKCHAIN? – VisualPolitik EN

Why do BANKS like BLOCKCHAIN? – VisualPolitik EN

Imagine this situation: you live in London
and you wanna buy a house in San Francisco. The house costs 1.3 million dollars… What comes in first? Your payment or the handover of the keys? If you happen to pay first, you might fall
into a scam… maybe the house doesn’t really exist or it’s not owned by the person you
contacted. Don’t forget that you live a thousand miles
away from there. You never saw that person. And, believe me, you won’t be the first,
nor the second person who lost money through online scams. Ridiculous as it sounds, this is one of the
most complicated problems we have in economics: trust. But I know what you’re thinking: you clicked
this video expecting something about blockchain, cryptocurrencies or maybe bitcoin… what
does this have to do with all of that? We’ll see right now. Nowadays, we all have heard of BITCOIN. I’m sure many of you also know other cryptocurrencies
like ETHEREUM, LITECOIN or RIPPLE. If you have dug deeper into this matter, you
might have also heard about another term: BLOCKCHAIN. For many, this cryptocurrency world is the
ultimate revolution that will end with governments and banks. For other, this is just another financial
bubble that will make it easier for criminals and terrorists to hide their money from the
police. Unfortunately, the reality is way more boring
than this… Bitcoin exchange reaches deal with Barclays
for UK transactions But hold on just a second! If you thought cryptocurrencies were just
a strategy to avoid taxes… I also have news for you… The Swiss municipality of Chiasso is going
to let residents pay their taxes in bitcoin, its mayor has announced. Let’s start from the beginning: BLOCKCHAIN. Blockchain is a technology, just like Virtual
Reality or the peer to peer file transferring system. As with every technology, you can use it for
many different things. One of them is cryptocurrencies and one of
those cryptocurrencies is BITCOIN… but it is not the only one! Many people think these new coins will substitute
legal fiat money, that is dollars, euros or any other currency. But it doesn’t have to be that way! In fact, cryptocurrencies can do many other
things, and we’ll take a look at some of them. But now, the real question is… What is blockchain all about? What is it used for? And most importantly… why are banks starting
to use it? Today, we are going to answer all of these
questions but, before we do, let’s take a look back at history. WHAT IS BLOCKCHAIN USED FOR? Look, BitCoin was born in 2009. Nonetheless, the technology it is based on,
the Blockchain was created in 1991. Let’s see how it works without even mentioning
Bitcoin. Why? Because it is important to understand that
Blockchain can be used for many other things. And since this is a complicated matter, I
asked Fonseca, one of the hosts of the Spanish VisualPolitik channel to show it to you by
drawing! Let’s go back to the example of the house
in San Francisco, that one that costs 1.3 million dollars. In order to buy it, you have signed a contract
with the owner but… How do you know he or she is going to meet
the agreement? How do you know the house exists if you have
never seen it in reality? Usually, we use a trusted third party like
a notary to verify it. This notary will verify the house exists,
and you talk to the owner, who’s willing to hand over the keys when he gets the money. This is the way any traditional contract Works. And it has many problems. First, many third parties mean many fees and
lots of waiting any time the notary, the real state agency or any other party wants to verify
something. But there is an even worse problem. If somebody hacked the computer of one of
those third parties, he could modify the terms of the contract. This means… traditional contracts are not
as safe as they seem. And this is where blockchain enters the picture. In this case, instead of using a traditional
contract, we could use a so called SMART contract. This is a little software that executes automatically
when something happens. In this case, you could leave your 1.3 million
dollars in a special account, so that at the moment when you open the door of your new
house, a sensor will notice your presence and BOOM! The smart contract will take your 1.3 million
bucks from that special account and send it to the seller. In case the key doesn’t work because you’ve
been tricked, then, the contract wouldn’t execute. OK, OK, all of this sounds great… but WHO
is gonna validate all of this? Well, in this case, we don’t need third
parties or middle men anymore. No notaries whatsoever. In this case… we have… a NETWORK! A network composed of all the members that
use the blockchain. Here is an example: PROPY is a company that
offers real estate sales internationally through blockchain. Well, in this case, all the sellers and buyers
inside of this platform would be nodes of the network. And in case you were wondering… the answer
is NO. No company has paid us to do this video. We used that company name just to give a real
life example. So well, the great innovation of Blockchain
is that its users will always have a copy of the contract. So all of them can be a point of verification. And in case one copy does not match the copy
of any other node, the system will consider this fraud. But not only that! This contract will ALWAYS be stored in what
we call a BLOCK. And this block, at the same time, will be
stored in a chain of blocks. This is why we call this system blockchain. So, if a hacker wants to modify our contract,
he would have to get into all the computers from all the members of our blockchain…
at the same time. As you can imagine, this is way harder than
getting into just one computer, no matter how secure it is. And now you might wonder… so… Anytime I start using some Blockchain service…
will I have all the registers and transactions that have been done inside? The answer is YES. In fact, if you wanna have BITCOIN, you should
download ALL of the blockchain, which now is over 160 gigabites. And now I can hear many of you saying ‘Come
on, Simon! That’s not true! I do have a bitcoin wallet and I didn’t
have to download all of those gigabytes!’ Of course you do! In your case, my friend, what you have is
a light coin. This means, another person downloaded those
160 gigabites and now that person is letting you use Bitcoin through his or her server. This said, Blockchain is starting to be used
for all kinds of things. As you have already seen, some companies offer
real estate deals with smart contracts. But there are many other applications. You can even have website hosting with blockchain,
so many computers inside of a network would have the data. Other companies offer medical records storage,
etc… But OK, we’ve already told you what Blockchain
is all about… now there is a second part and that is… What do banks have to do with all of this? We’re gonna check that out right now. SURVIVAL OF THE FITTEST If there is one thing that generates all kinds
of gossip, mixed signals and conspiracy theories… it’s cryptocurrencies. You just need to google the name of any famous
company, followed by the word ‘cryptocurrency’ and you will get some blog that claims that
this firm wants to get its own cryptocoin, or the opposite, or both things at the same
time. The information noise is so pervasive that
it is almost impossible to separate the wheat from the chaff. And this is also a heads up for you guys who
might wanna start investing in this industry: watch out! I’m not telling you not to do it. But be careful because there is a lot of hype. And this is why, to do this video, we talked
straight to the sources so we could corroborate that THIS is true. BBVA and Indra will make the World´s first
blockchain based corporate loan In this case, Indra is a Spanish engineering
company and BBVA is a large Spanish bank. The idea is pretty similar to what we said
about the house in San Francisco. In this case, BBVA signs a contract with INDRA
and all the members inside of the blockchain will have a copy of the same. What’s the advantage of all this? It would prevent internal corruption. Some people might want to exaggerate the cost
of some building in order to get some money in his pocket. But if they have a smart contract, and everybody
has a copy of this one, they can track every transaction. This means that both the company and the bank
are protecting themselves from their own workers. But we aren’t only talking about loans here! As we said before, Blockchain can be used
for many other things. And, apparently, Spanish banks want to pioneer
this. Here is another example. Santander to launch the first blockchain based
International Money transfer service In this case, we are talking again about reducing
verification times. You see, anytime you make an international
money transfer, you have lots of intermediary banks. For instance, if you wanna send 1000 USD to
a friend in Germany, somebody has to verify that you have 1000 USD less and your friend
has 1000 more. Add to this the problems from the currency
exchange and you have lots of intermediaries that need to be in contact and verify every
step of the process. Companies like RIPPLE use blockchain to do
this in a matter of seconds. And this is why Santander will now start making
international transfers from one day to the other. In fact, both Santander and BBVA have been
investing in cryptocurrency companies for years. There are all kinds of blockchain platforms
that the main European banks are members of. From Wetrade to the Spanish Alastria. How much of a future do these projects have? We don’t know. But clearly, it shows an interest from traditional
banks in not missing out these technologies. And now I know what you are thinking… so
far, we just talked about faster transactions and safer contracts… nothing really exciting,
right? Where is that revolution some people are talking
about? Well… believe me, there is a potential revolution. But we will talk about that in the following
weeks. In the meantime, don’t forget to subscribe
to VisualPolitik, and click on the bell icon so you don’t miss any of our posts. Now it’s your turn… so far, we talked
about banks using blockchain technology but… what about the cryptocurrencies? Yes, Barclays is offering services in Bitcoin
but… Will they use it as a normal thing? Will we see new kinds of services thanks to
cryptocurrencies? Please, leave your answer in the comment section
below. Also, don’t forget to visit our friends
from reconsider media podcast, the podcast that provided the voices in this video that
were not mine. If you liked this video, give us a thumbs
up and, as always, I’ll see you next time.

100 thoughts on “Why do BANKS like BLOCKCHAIN? – VisualPolitik EN

  • The name “blockchain” came from chain of blocks. But, that’s not all what a blockchain is. It’s a special data structure with it’s own properties and changing any of that will change the data structure. For example, a linked list is also a chain of blocks, but it’s not at all a blockchain.

  • “If you want to have a bitcoin, you need to download the entire blockchain.”
    Whaaa?? That’s wrong on so many levels that I wouldn’t even care correcting it.
    PS: Having a bitcoin only means that you have a private keys to an address that holds a bitcoin. It has nothing to do with light or dark wallets!

  • i see no reason to speculate with crypto currencies. blockchain is used in cloud services for validation. there is an open sap course starting tomorrow on blockchain that will give an overview.


  • Now, let me clarify another thing to you. A blockchain is not the same as a regular database. To be able to take advantage of blockchain, you need to have a decentralised miner base, otherwise you’ll lose the most important feature of blockchain i.e. immutability. If the blockchain doesn’t offer that, then it’s a pretty inefficient database. This is why private blockchains are almost as untrustworthy for the end user as a regular database. Although, it might help senior authorities of a company to keep track of records to a certain extent.

  • Excellent work Simon and Co. No use being in the know if we can't leverage it to invest and build better products. Thank you for enabling us

  • Can you edit the videos better for ads, they jump in at important moments and I have to go back because of my short attention span.

  • There is a start up called Skychain that uses blockchain for medical AI training. It is not only financial progress, but medical (& other fields) as well

  • The real power of blockchain is that it enables the creation of decentralized currency. The decentralization here refers to the lack of central authority, not to the fact that the same database is copied and validated multiple times.

    Currently, the banks draw most of their power from the centralized structure of our currencies. The banks also understand the threats this new technology poses to their power structure and they're trying to find a way to incorporate the technology (blockchain) without relinquishing their power (bitcoin).

    Eventually, when the dust settles down, the banks that will still be relevant will be those who understand that the real value they can offer their clients in a decentralized world is in supportive tools and services for real public blockchains.

  • Please check for repeated scenes right before uploading videos to Youtube. I understand you work hard at making these fantastic videos and that in comparison I know nothing about the art, but it just seems a shame to waste that hard work. Thank you.

  • Nice the only video that i understand about blockchain. Heard and watched a lot of about talking about how to get more money on crytocurrency.

  • Terrible video from a normally great channel. Blockchain is a completely meaningless word that does not solve the 3rd party problem. Blockchain is a data structure in bitcoin with no other use than in bitcoin

  • So the dollar already has a lot of this in how it practically functions, only slower and with less verification. Going full crypto, while difficult do to scale, would have a lot of efficiency advantages.

  • You have made a mistake about litecoin, someone who has a bitcoin wallet, has a light wallet which piggybacks from another full wallet somewhere where the entire blockchain is downloaded.
    A lite coin is a different type of coin which was initial a forced fork on the normal bitcoin network

  • I have watched all of your videos, I do however specialise in blockchain technology, there is a lot of inaccuracies in this video, I would recommend redoing it.

  • Don't know much about cryptocurrencies, hoping someone could answer this.
    I'm Canadian, money is in CAD$. If I wanted to exchange into Euros€ could I concert CAD$ into a cryptocurrency and then once more into Euros€ and bypass exchange rates?

  • "Be careful because there's a lot of hype" – funny words after almost 10 months of bubble bursting to the bottoms dot com never achieved.
    – Crypto is 80% down
    – Watch out, it's probably a bubble!

  • Subhana Allah connect me) going lose money Mashallah no problem) l b4 follow you country money 000 Mashallah next no have chance you

  • The clear amount of time and effort that went into this video really shows how much you care about the content you make. As always, love your videos.

  • Property trade is one of the best application of blockchain technology. It breaks barriers and unprecedented in terms of speed and liquidity. It is possible for any kind of property to be turned into liquid assets including the Pyramid or a castle if people want to. Buy a villa in Bali from Texas and finalize all the paperworks in a matters of minutes not days.

  • Blockchain is the hammer that sees every problem as nail, most of the times it's better not to hammer the problem
    It's more efficient to establish trust between parties than to establish trustless blockchain network
    Worse, if more than 51% nodes behind a great firewall the network can decide to reject your transaction forever

  • What about all of the negatives? Such as: 1. scalability – despite Bitcoin transactions being a minuscule fraction of global finance the blockchain is already in the gigabytes and the system struggles to keep up. It is insane to carry around the history of transactions in the entire system (including micro payments). 2. the real world trigger for verification – who verifies that the house with the sensor that verifies the transaction actually belongs to the person selling it. There still needs to be some trusted third party involved and these smart contracts just kick the verification can up the road. 3. lack of stability of crypto currency prices – to be valuable as a way of conducting transactions you need confidence that your bitcoins won't suddenly drop in value. This is why nobody conducts international transactions in the Venezuelan Bolívar. 4. environmental concerns – blockchains are the most inefficient technology ever invented – you are using vast computing resources to conduct meaningless calculations for no better reason than that they require vast computing resources to do, thereby making it impractical to brute force the system.

    That is just a start. The real reason for the blockchain fever is the same as every other fever – nobody wants to miss out.

  • https://webdollar.io/pool/1/BACMpool/0.01/21dc1f57cb7338963ea159877b4ade97b71dd11ac17292e3852bdc33a26a17e4/https:$$pool.bacm.ro:443/r/WEBD$gBZzbgwRMZBGzBGBI3deKG9qskbGcMzHCf$

  • In general the answer to your final questions on potential is that the potential is extraordinary. However, it's important whenever discussing "Ripple" to make a distinction between the company's private and public blockchain products. If I recall correctly, Santander is to use their private blockchain, which like all private blockchains, doesn't require cryptocurrency.

    xRapid is the Ripple Labs product that uses XRP token that people can buy. It is about to be released soon. We'll see if it actually gets adoption. But even if it does, it is important to also note that right now the value of XRP token is many, many multiples of the value of the entire Ripple Labs company that owns about 60% of the coin. That's if we assume a recent round of funding assessed the company's value correctly. So no matter what, this coin is massively over-valued.

    Right now most crypto investors don't understand anything of what I just wrote. Therefore, who knows how high the price of this centralized "crypto" coin will rise. But I imagine that eventually people are going to learn how to assess fair value in this space the same way they have in public company stocks. One would hope anyway.

  • hey, Simon, I think this is the second time I noticed some repetition in cuts in your video, I just wanted to comment to let you know so you can address it next time.

  • In the house example (in pretty much all examples), you still need trust. The smart contract may be triggered by whatever it is triggered by. But, the buyer can always claim it was a fraud and not go through with the sale, even if it wasn't fraud. And, if the seller can get you to trigger the contract, the seller can offer a fraud and walk away with the cash. Trust issues do not go away. Say I create a smart contract with a buyer for some service and the buyer must pay me when I complete the service. Who decides when the service is completed and what stops the seller from saying the service is complete when it's not and the buyer from saying the service is not complete when it is? All smart contracts can only work when trust is preserved and otherwise they are no different than any other kind of contract that requires the courts for enforcement. in short, smart contracts don't really do much for us. There are other benefits to block chain, but workflow is not really one of them. Transferring money where party a drafts account, converts to a coin, sends to party b who accepts coin and then converts to fiat on an exchange is an example of benefit. But that has nothing to do with smart contracts and could work with any virtual currency that was backed by a monetary exchange. So…. blockchain is interesting and it does bring some value to the world of computer science. But, I still have to find any example where blockchain does what some other existing method or technological architecture does not. I'd love to hear about some practical application of blockchain that usurps modern existing technology solutions. The only really useful thing I see with cryptocurrency so far is to transfer money faster between multiple parties (and like I said, there's nothing that stops us from being able to do that with PayPal or some other non-blockchain virtual currency).

  • You don't need to hack whole network in case of smart contracts you are talking about. You just have to hack oracles. And thats the whole problem with all blokchains that are trying to solve all this problems. Only working use case for blockchain is money aka Bitcoin. All others are scams or in best failed projects.

  • Bitcoin is the slowest moving "world changing event" in history. If the internet had developed at this rate we'd be figuring out this weird concept of "digital mail" about now.

  • @VisualPolitik EN are you being payed or are you as dumb as fuck? Crypto currencies and smart contracts are like banks and stuff signed with hard asymmetric certificates except far more expensive (distributed across many people so that not a single person has to carry the burden of the entire cost of a single transaction) and slower (yes slower – the blockchain technology is slower, the banks just tend to run things in time slices called cycles so that they can pay less for maintenance as the system has no real time requirements and they can use money for other things while it is in their bank – nothing to do with technology, just with rules). Smart contracts are trust worthy while inside the same system (buying coins with coins of the same crypto currency) other than that it requires a trusted third party that guarantees to the system that what is outside the system (the house) is really there and the person that is selling it inside the system is really the owner – for that stuff you need third party to confirm something and that is a state with laws. Long story short: cryptocurrencies and block chains are buzz words with no technological value compared to existing technologies and european union's PSD2 laws and co are far more impactful and useful (and this is most likely destroying the monopoly of banks over accounts based on the kick in the butt that the world got from crypto currencies hype so they weren't useless – were in fact really useful in EU – but from technology standpoint they are useless)

  • Blockchain was not created in 1991. Maybe you mean Proof of Work from the 90s. Solving the Byzantine Generals problem (Probably what you mean by "Blockchain"), was part of the innovation of Bitcoin (2009).

    As for the idea that banks can use "Blockchain" tech for these uses, it doesn't add up. You need nodes, people to host the blockchain to validate the changes to the network. That means you need the whole blockchain downloaded (as you stated). And with the huge number of data being sent through such a network, that blockchain is going to be growing alarmingly quickly. So why would anyone want to spend large sums of money hosting a massive blockchain for a service they use once or twice? What these banks and tech companies are proposing is NOT a blockchain but actually a database… nothing new, nothing innovative, just buzzword "Blockchain" to pretend something is more innovative than it is. Ripple for eg is really a database NOT a blockchain based cryptocurrency because the network is closed. There is no proof of work or more importantly, no client you can freely download to host this imaginary "blockchain". ONLY "trusted" parties can act as nodes in the Ripple network and that means it is exactly like the banking system today using a Database to manage account balances.

    Still it's nice to see videos trying to look at the technology and the use cases rather than the money to be made. If you ever need any technical advise on cryptocurrencies (most specifically Bitcoin) feel free to message me. I've been watching your videos for some time and would be happy to give something back for all the hours of entertainment/education.

  • So basically blockchain is going to help us trust each other more? This is good, we need trust, and currently we're not honest or fair enough to maintain it (as efficiently as we could). Thanks Blockchain.

  • Awesome, I love the new camera)
    If I haven't spent hours trying to get what is blockchain about this video would have been way less clear, but this is a bit different perspective, thanks.

  • its kind of weird that you are talking in 2018 about technology of 2010… 8 years late is this channel to reality :S so late…..

  • You should point out the distinction between public and private blockchains. The major breakthrough of the blockchain is the descentralization of trust, which removes the need for middlemen and empowers peer-to-peer interactions (public bockchain). If you remove this fundamental feature you end up with a complex database, but you can still call it blockchain (private blockchain) and still be the middlemen. Banks are interested in the later.

  • block chain is just not for money transactions it is untraceable Email SMS text messaging phone calls data storage block chain is just not for monetary exchange exclusively !!!!!!!

  • if every node has a complete copy of the chain, why would this ever be considered secure from government oversight? Wouldn't they just need a node to trace every dollar's owner and movement? It sounds like a government's best friend.

  • TYCOON69 – FIRST HYBRID BLOCKCHAIN COMMUNITY BANK. bank that guarantee profit. The aim of this bank is to enable people to hold their capital in a more appropriate form than the current Fiat money. And in years proven by the commodity (gold) and at the same time to give people a more modern way of sending capital, in the form of a cryptomain, which is supported by gold. + cashback card. Link: https://tycoon69.com?psh=A3SBYF

  • Bitcoin is one the most big scam ever exist. Here is the very basic scam. Let said, each of 10 people buy 10 coins @ $1/coin. Total coin is 100 and the sum is $100. After a lot of hikes, someone is willing to buy @ $10/coin. One guy sold his 10 coins and he got $100 from the sale. Now, how much money remaining? Still $100. That is meant, the dumb person who paid $100 for 10 coins is already lost $90. Yes, he can buy more and the remaining 9 people are very happy to sold him their coins. That isn't yet consider the lack of interest earn plus deposit insurance that available in some countries.

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  • Blockchain is reality now and will replace most of legacy banking system in 2019 and social/governance systems soon. Please check if below social moral principles can help in the core fabric this revolution

    1. One should always be ready to accept truth and to renounce untruth.

    2. All acts should be performed after deliberating what is right and wrong.

    3. The prime objective of new Society is to do well to the world, that is, to promote physical, spiritual and social good of everyone.

    4. Our/Every one conduct towards all should be guided by love, righteousness and justice.

    5. We should dispel ignorance) and promote (knowledge).

    6. No one should be content with promoting his/her good only; on the contrary, one should look for his/her good in promoting the good of all.

    7. One should regard oneself under restriction to follow the rules of society calculated to promote the well-being of all, while in following the rules of individual welfare all should be free.

  • Cryptocurrencies are immoral, bad, and wrong in the same way wall street investment bankers and Venezuela money presses are.

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