Blockchain is the “Fourth Industrial Revolution” and Wall Street Is Already Invested, According to Fund Manager
Wall Street’s biggest banks have already pivoted toward cryptocurrency and blockchain technology, according to Steve Chiavarone, a portfolio manager with U.S.-based Federated Investors. In his view, it’s only a matter of time before blockchain begins to replace many important facets of enterprise finance, including reconciliation and supply chain management.
The Fourth Industrial Revolution
In an interview with CNBC, Chiavarone predicted that blockchain technology will help “drive the next industrial revolution,” a phrase that describes the next phase of technological innovation.
When assessed purely from an enterprise perspective, blockchain “has the ability to replace reconciliation, which is expensive and requires back office, time, and paperwork, with more instantaneous verification,” Chiavarone said. This not only frees up resources to create more efficient supply chains, it can lower enterprise costs so that savings can be passed along.
Federated Investors, which manages $364 billion in client funds, has identified blockchain along with four other emerging technologies as being the next great disruptors of our time. The other technologies include automation, robotics, artificial intelligence and the Internet of Things (IOT).
Chiavarone indicated that several major banks have already begun investing in blockchain and cryptocurrency, chief among them being Goldman Sachs. Though the bank has only recently confirmed its entry into cryptocurrency as a market maker, Goldman has been involved in the industry for several years through Circle Internet Financial. Earlier this year, the Goldman-based Circle acquired cryptocurrency exchange Poloniex in a deal that was reportedly worth $400 million.
In a 2016 publication, the World Economic Forum described the fourth industrial revolution as having three essential characteristics: velocity, scope and systems impact. In other words, the speed of current innovations is unlike anything we’ve seen before, the scope is much broader and the breadth of change can transform “entire systems of production, management and governance.”
Although WEF did not specify blockchain in its analysis, distributed ledger technologies are being adopted by a wider audience to achieve similar goals. As the ICO boom has clearly demonstrated, blockchain applications extend far beyond finance to just about every sector imaginable.
At a practical level, distributed ledger technologies reduce and in some cases eliminate the need for broker activity, thereby disrupting sectors tied to insurance, real estate and paralegal services. For banks, blockchain is also being used to reduce or eliminate enterprise operations tied to auditing, reconciliation and manual labor.
As an interoperable and immutable ledger, blockchain is becoming one of the most trusted ways to store and verify sensitive information.
Blockchain still has a long way to go to achieve the type of mass adoption Chiavarone is talking about but it is already clear that the technology’s fate extends far beyond the performance of cryptocurrencies.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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