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Perspective: Bitcoin Primer, Part 2 — Bitcoin and the Banks

Perspective: Bitcoin Primer, Part 2 — Bitcoin and the Banks

This IDC Financial Insights Perspective is Part 2 in a six-report series on bitcoins and the use of digital currencies. Part 2 looks at how banks are responding to a network-based electronic process that records and transfers value using technology that is usually referred to as a blockchain. The technology involves distributed legers, cryptology, and unique algorithms. The result is a secure core process that functions without central control. A common use of this technology is the support of digital currencies like bitcoin, which is currently the dominant digital currency.

Blockchain has taken everything known about the Internet, security, and cryptography to build a payments system designed for the Internet. No party owns and controls the network, and access is available to everyone. This is a powerful concept — one that can be applied to many other situations involving electronic transactions and record keeping. The end result is that blockchain technology will change everything that we know about managing value and not just financial service processes.

In this Perspective, the terms virtual currency, digital currency, and cryptocurrency are used interchangeably with the name of the leading virtual currency bitcoin. All dollar amounts are U.S. dollars unless otherwise noted.

Please Note: Extended description available upon request.

In This Perspective
Situation Overview
Potential Bitcoin Impact on Banks
Why Banks Need to Consider Cryptocurrency
Virtual Currency Recognition by Banks
What the Innovators Are Saying About Banks
Potential Banking System Impacts
Potential Central Bank Impacts
Banks Dipping Their Toes in the Bitcoin Waters
A Bank That Gets It
Final Thoughts
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