I asked myself this question recently, which of course led me to thinking about the possible answers. I asked a colleague, and they said that they supposed it would be a case of  ‘same old, same old’, if bitcoin didn’t exist, or that something else might have emerged. In fact, I can’t think what that alternative might have been, because blockchain seems to me an entirely logical consequence of a matured worldwide web. I’m using ‘bitcoin’ in the question as a kind of shorthand for ‘blockchain’, because they are inextricably connected. Blockchain is the software protocol that is the foundation of cryptocurrencies, and it couldn’t exist without the Internet. When I considered the question, it struck me that the best way to answer it is to look at all the positive benefits that blockchain has brought us: in other words, what would we be missing if it didn’t exist? Although, let’s remember that we are still in the early days of blockchain, and we are nowhere near understanding its full potential. Who invented blockchain? The answer to that is a person or group of people called ‘Satoshi Nakamoto’.  This name is of course synonymous with bitcoin, because its first use was to build the public transaction ledger for the bitcoin cryptocurrency. It is an open, distributed ledger that records transactions between two parties in an efficient, verifiable and permanent way. It’s this characteristic that made it ideal for financial services. To put it simply, as Guru99’s blockchain tutorial does: “The blockchain is used for the secure transfer of items like money, property, contracts, etc. without requiring a third-party intermediary like bank or government.” Why invent blockchain? The desire to remove third-party intermediaries was a response to the global financial crisis caused by the big banks back in 2007. Public opinion quickly went through a 180-degree turnaround and respected institutions became pariahs. So, there is a case for claiming that if the bankers hadn’t almost crippled the developed world, perhaps we might have had to wait for another Big Event before the technology-minded developers considered creating what became known as the blockchain. Up until then, banks served as intermediaries between us, the customers, whether business or consumer, and people or companies we needed to send money to, or receive it ourselves. What the financial crash revealed to everyone is that the banking operations were not at all transparent, because they were centralized systems operated by a cabal with over-inflated salaries. Then we were told what they had been doing, especially with sub-prime mortgages that disadvantaged the most financially vulnerable sections of society, and the feeling that they couldn’t be trusted grew. But what could we trust? The answer emerged as the blockchain, which is ‘decentralized and trustless’, partly because the whole blockchain is pure maths, and the numbers don’t lie. That is one way to put it. Decentralization is also key to the blockchain. Rather than a single entity controlling it, the blockchain operates on a network of computers with no overarching control centre. The birth of Fintech Meanwhile, bitcoin and the other emerging cryptocurrencies became a hot topic, with bankers such as Jamie Dimon of JP Morgan famously loathing it, a sentiment shared by Warren Buffet who called crypto “rat poison squared”, while a swathe of Bitcoin Bulls, such as Max Keiser, have talked it up. Moreover, because people like Keiser came from a financial services background, he and similar supporters made more solid claims for the leading cryptocurrency than bitcoin’s initial support community, which mostly consisted of cypherpunks and libertarians. As crypto shifted towards the mainstream, Fintech emerged. This shortened form of ‘financial technologies’ soon demonstrated how blockchain could be used to provide more efficient transaction options to businesses and consumers. The arrival of companies such as Transferwise threatened the bank’s monopoly on financial services, because with their cumbersome legacy systems, they simply couldn’t compete with a platform that could provide same-day international currency exchanges for fees up to 90% less than those charged by banks for the same service. The mobile world of neobanks Consequently, Fintech has made a dent in the retail banking sector. The blockchain made possible the birth of neobanks, typically digital-only banks, accessed by customers via an app on a mobile device. A report by Medici published in 2019 suggested that neobanks are having the same effect on banking, as quantum theory did on our ideas about reality. It also explains that the neobanks have gained their successes because they are meeting the customer where they are and are finding ways to connect advice, banking, and investing in one experience. Europe, and in particular the UK, is leading the charge of the neobanks, or challenger banks, as some people refer to them, with the leading brands being Atom Bank, Tandem Bank, Monzo, Starling Bank, Revolut, and N26. However, the developing world is where the use of blockchain-based banking services can potentially have the most impact. Worldwide, some 1.7 billion adults are unbanked. However, two-thirds of them have mobile phones, and this makes digital banking an attractive proposition if financial inclusion is to be achieved. A white paper by Network International says “The amount of money processed through point of sale (POS) devices – such as card machines – remains only 5% of GDP in Africa, compared to over 30% in some countries.” Commenting on this, Andrew Key, MD of Network International’s Africa division said, “Cards have a long future ahead, but I predict that in Africa a large portion of the population will start with a digital version of an account.” No blockchain? Whilst blockchain has become a force to reckoned with in the financial world, whether from a financial services perspective, or from that of the acceptance of digital currencies, this is not the only sector where blockchain has had an impact. Medical records, legal documents relating to contracts and property, taxation and the tokenisation of anything from an Aston Martin to a private mansion are all examples of other blockchain uses. And there will be more to come. To sum up, if blockchain didn’t exist, then we wouldn’t have fintech, neobanking, smart contracts or any of the other myriad ways of using this technology. Perhaps most significantly, we wouldn’t have what I think of as the democracy of a decentralized system that is inclusive, and where ‘trust’ is no longer required. We would not have that if bitcoin didn’t exist.

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