When executives in the financial services industry enter into a discussion about blockchain technology the first question generally asked is: “Why should I use blockchain technology?” This question is quickly followed by, “Why should I trust blockchain technology?”
Executives and businesses succeed when they ask better questions.
Perhaps, the better question is “What can the industry use this technology for, now that blockchain is becoming a ‘common’ technology?”. Currently the most effective use of blockchain relates to areas where a group needs to be able to trust something – but can’t agree on a centralized place they can all trust.
Take leading retailers such as Walmart, Amazon and Target. These companies compete toe-to-toe daily and aren’t likely to trust each other to host any kind of shared truth. Innovators have created supply chain solutions that allow them to work with suppliers – to share key information – while their competitors use the same system. The blockchain-based solutions add data that each party can trust. They do this by using cryptography to lay down layers of data that relate to each other. This is kind of like how a pearl forms. A layer of material is added and hardens, protecting the layer below it, and the process repeats. As more and more layers form, it gets harder and harder to change anything below.
When dealing with blockchain technology, the possibility of a threat to the underlying layers of information would have to occur within seconds, if not milliseconds, of the data entry. These linked layers – the chains - make it is nearly impossible to subvert this “truth” in minutes, for example, which is the time it would take for a fraudster to even have a chance at attempting to disrupt the blockchain technology and its housed data.
Establishing Blockchain Trust
Blockchain technology works because the system’s consensus agrees that the “truth” is as written—there is no deviation from this truth, human interaction or otherwise. Trust is often regarded as a leading hurdle in the adoption of blockchain technology, but it should not be.
With blockchain technology and cryptography, a credit union is not placing its trust in an antiquated vendor solution, but rather trusting the math behind blockchain technology, which has been studied and vetted in amazing detail. In the case of digital identity, blockchain technology is the most secure, trustworthy way for credit unions to issue identity credentials. Credit unions remain in control of what they need, while enabling their members to simplify their lives and be more secure.
Blockchain Adoption in Credit Unions
Currently, most credit unions that are using blockchain technology do so for very specific uses cases, such as call center identity verification. Through CULedger, many of these credit unions are also tapping into the Sovrin Network, which is a global digital identity system that allows people and organizations to control their digital identities online. Approved blockchain nodes can connect to this network.
What surprises many credit union executives about this network, in particular, is that no information about members is stored on the ledger. Personal information is kept completely private. The public ledger is used to anchor critical information such as the public keys of the credit unions in the CULedger network. Well over 99.9% of the information used with CULedger is completely private and held either by a member or in credit union’s secure systems.
Last, credit union executives need to understand importance of governance in this technology. The lack of governance is a major cause of blockchain technology-related problems (aside from the improper handling of digital wallets). A strong governance network ensures privacy by design, supporting both current and future privacy requirements. Each day, more governance is added to our nodes to ensure bad actors cannot access the network.
By joining the right blockchain network, credit unions are well-positioned to place its trust in blockchain, especially when this technology is held to strict governance standards.