Will blockchain technology remove banks

The blockchain is a safe bank

A bank without a vault is already conceivable today, and a bank without a blockchain will soon no longer be. Because blockchain technology makes money digital, secure and highly liquid and therefore valuable and essential for digitization and Industry 4.0.

People strive for security, especially when it comes to money.

When we say that someone is "a safe bet," we mean that they can be completely relied on. But are banks safe? And can we rely on our money? Banks - once a proverbial synonym for security - have lost confidence in the financial crisis since 2007/2008. And it's not just about the security of money at the bank, but also about the security of data at the bank, data about money, about customers, about trade secrets and much more. Not only because the European General Data Protection Regulation has tightened data protection since May 2018, banks have massively upgraded here. As a core competence, the security of data should be the supporting backbone of the banks. Without security there is no bank, without banks there is no security, so the expectation.

Money and data

When we ask the question whether our money or our data is safe, another question arises: can money and data be distinguished from one another at all? In reality, both are the same, money is basically nothing but data. The Bundesbank clarifies what has been speculated about for a long time and how a secret in two very clear videos. Money is generated electronically according to certain rules at the push of a button, mostly as book money from private banks, to a lesser extent as central bank money from the central bank.

But who guarantees compliance with the set rules? Who guarantees a fair distribution and sustainable investment of the money? Who makes compliance with the rules transparent? The financial crisis, but also data scandals by banks such as the purchase of tax data by authorities or the recent theft of tens of thousands of credit card numbers show that not all rules are adhered to and that even the enforcement of the rules is fraught with potential for conflict.

Secure data is the be-all and end-all of a secure financial system

Does the escape into cash protect us? Probably only to a limited extent. Because even banknotes and coins are dependent on an electronic infrastructure, on ATMs and cash register systems, are recorded and booked electronically. It becomes clear that if our data is not secure, our money is at risk in whatever form. The printed or embossed numbers on banknotes or coins are no less virtual than those in the IT systems of banks and central banks; the entire amount of money is recorded and tried to regulate via an electronic reporting system.

How you turn it around, secure data processed using secure information systems are the be-all and end-all of a secure financial system. And we cannot afford insecure money. As a medium of exchange, it forms the basis for the efficient exchange of goods based on the division of labor and for a systematically efficient and sustainably profitable capital allocation. Without safe money, our prosperity would collapse, because money is the nervous and information system of the economy. Money is used to generate prices and price signals, which are used to control investment decisions, supply chains and ultimately the supply of the population with essential goods and services.

Digitization of money: from dream to nightmare

Banks therefore have a special responsibility towards society to be secure, and this security can only be guaranteed through secure information systems. Banks that do not guarantee this security will hardly be able to hold their own against the competition. The digitization of money for the automated servicing of contracts as the basis of Industry 4.0, the Internet of Things and convenient payment by touch, light and quiet as the wind and inexpensive, is one thing. Without incorruptible security as a basis, this dream could soon turn out to be a nightmare, the dark side of which such as unbridled speculation, transparent citizens, transparent consumers, involuntary surveillance and economic chaos can soon darken our happy expectations. Without a doubt, safety comes first!

Distribution, chaining and encryption in one

Blockchain technology can provide the answers to all of our questions and to our need for security, for safe money and safe information. Security is “a megatrend”, but also “a desire for control and freedom at the same time” and should combine further apparent opposites such as “stability and agility” as well as the avoidance of risks and at the same time the preservation of opportunities, writes the renowned Zukunftsinstitut from Frankfurt on the Main river. Indeed, as a novelty in information technology, the blockchain seems to be the egg-laying woolly milk-pig that can meet all of these at first glance contradicting requirements. Where previously fast transferability and high availability of data were possible, this was mostly at the expense of document stability, as in the case of e-mails, for example, and made them susceptible to manipulation. The Internet has become the epitome of freely available information that can be accessed at lightning speed around the world, but also the epitome of fake news, hackers, fraud, illegal trade, illegal retrieval of data, dangers from viruses, phishing or Trojans as well as nuisance from spam, pop-ups and much more Unpleasant more.

Blockchain technology can, however, combine the availability of data and their document stability. This is made possible by its three properties of distribution, chaining and encryption of data, which it combines with one another. This is exactly what makes blockchain-based money so secure.

  • Distribution: Because the information about who has how much money is stored on several and not just a few central servers and a “majority opinion” always counts here according to a so-called consensus procedure, an individual cannot simply book a higher account balance than the jointly adopted rules allow . That is comparable to the public statement. A public text, a public speech, a court decision or a parliamentary session are more binding and less easy to revise than a silent thought or a personal note. The redundant booking of information on numerous servers also creates enormous failure safety, so that the system can continue to run even if individual servers fail.
  • Concatenation: Because every transaction or transfer contains a fixed reference, a kind of link to its previous transaction, a transaction can no longer be withdrawn or changed afterwards without all subsequent transactions no longer matching it; the entire database would be "shot up". This is comparable to a contract that is understood with a notarized bond. Removing a page from it or adding a new one is not that easy.
  • Encryption: Because transactions are converted into one-to-one keys (so-called hash values) using a complex and computationally expensive algorithm, it is not worth making incorrect postings to outsmart the consensus mechanism (majority opinion) for economic reasons; some kind of built-in spam protection. In addition, each transaction remains unique, so that the same transaction can only be made once. Encryption can also protect privacy, so that only the intended recipient of information can also decrypt it with a specially assigned key, even if the information is sent publicly over the Internet or stored on numerous servers. Such encryption methods have been known and used since ancient times.

The greatest invention since the discovery of agriculture

The principles of distribution, concatenation and encryption, which have been successfully applied to information processing since the beginning of civilizations, combined in one and the same technology, combined with the speed of information transmission through the fiber optic cables of the World Wide Web, are a revolutionary invention. As a result, information is practically not only ubiquitous, but also very secure. Blockchain is the greatest invention since the discovery of agriculture, says the dazzling cyber security expert John McAfee, founder of the antivirus software of the same name. And this invention can satisfy our hunger for security, safe money, compliance, transparency and justice without burying our freedom and privacy.

The fact that, of all things, the European Central Bank, in its current study from December 2019, shows serious ways to make digital money anonymous and thus to equate it with previous cash in terms of data protection and to follow up with another study on digital central bank money in January 2020, makes one confident. But numerous private initiatives on digital money beyond Bitcoin, Ethereum and Ripple, such as the joint project between Commerzbank and Daimler for an e-euro based on the blockchain, are a good sign for the financial center of Germany and Europe. Digital money is a necessary and overdue complementary good to goods and services that are exchanged digitally over the Internet. It seems certain that digital money will come, that security will be the basis for it and that this security can only be achieved through blockchain technology or the aforementioned aspects that make up this technology. Nobody can turn a blind eye to the fact that blockchain is as secure as a bank and digital banks in the future can only be as secure as banks need to be through blockchain. Only banks that can acquire this technology will therefore still exist in the digital world in the future. The race for the money of the future has begun.


Ralph Bärligea

Ralph Bärligea is a co-author of the article. He is Senior Business Consultant at BearingPoint in the area of ​​Digital & Strategy with a focus on banking and the public sector on the topics of digitization, payments, blockchain and data protection. As an expert on blockchain technology, he advises the German Bundestag in public hearings.


The article is part of a series on megatrends and their effects on financial institutions.

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