Article Review – Op Ed WSJ “Blockchain is Much More than Crypto”, by David Solomon
As a longtime participant in financial markets, I still see blockchain as a promising technology if allowed to innovate under the right conditions. Under the guidance of a regulated financial institution like ours, blockchain innovations can flourish. – David Solomon.
This is the key lesson from the op-ed “Blockchain is Much More than Crypto”, by Mr. Solomon, chairman and CEO of Goldman Sachs.
Blockchain technologies such as peer-to-peer payments and the tokenization of traditional assets are changing corporations, from how they raise money to how investors trade stocks. This has far-reaching implications for the global economy.
A lot has been said about crypto and blockchain after the recent FTX scandal. As we said in one of our previous blog posts, the failure of the exchange was not related to any intrinsic characteristic of crypto or blockchain technology, but due to what can only be seen as criminal behavior by the founder, Bankman-Fried.
In addition, cryptocurrencies are merely one of blockchain’s many applications – there is a sea of possibilities out there. Used correctly, blockchain can support responsible innovation across the financial industry, can increase work efficiency, reduce processing times and, most importantly, blockchain can make the financial system more transparent and accessible.
Let’s see in more details. Through self-executing or “smart” contracts, whose trade terms and settlement instructions are written directly into the program code the risk that either party won’t hold up its end of the bargain is reduced significantly – which builds even more confidence in the financial system.
By accessibility, we mean financial inclusion. There are considerable barriers to getting involved in big loans and credit lines for instance, such as minimum investment amounts to get in and long waiting periods to get out. With tokenization, selling and purchasing is made easier.
However one thing is crucial for blockchain to flourish in a large scale: mitigating risk and building proper controls. The best way forward is building strong relationships with government and policy stakeholders. By working together, law enforcement would receive the appropriate tools to combat the rogue elements that are present on the platforms without infringing on investors' rights or sabotaging legal companies. A win-win situation.
Nonetheless, it is important that the government doesn't go too far with regulation and wreck the technology. The decentralized nature of blockchain and De-FI is one of their greatest benefits, and it has attracted many novice investors.