Sunday, 05 April 2020

Commercial Bank joins international blockchain collective

Commercial Bank has become the first bank in Qatar to join enterprise software firm R3’s collaborative initiative to develop innovative applications and solutions on its Corda blockchain platform.

The Bank joins R3’s global network of more than 300 of the world’s largest financial services firms, technology companies, central banks, regulators, and trade associations working together on Corda – an enterprise-grade blockchain platform that removes costly friction in business transactions. Through Corda, institutions can transact directly using smart contracts while ensuring the highest levels of privacy and security.

Commercial Bank’s membership of R3 is further evidence of its commitment to apply the latest technologies to improve services for customers and to drive operational efficiencies. It also demonstrates the Bank’s readiness to collaborate with other organisations in the financial services industry to find new ways that blockchain technology can be used.

Robin Marshall, Chief Information Technology Officer at Commercial Bank, said: “We already know that blockchain technology has the potential to make transactions between banks frictionless and secure, but there are potentially other, huge benefits of this technology that we are not even aware of.

“To find out the full potential of blockchain and to use it in day-to-day operations, financial services institutions must work together collaboratively and that is why we have joined R3. Our aim through this partnership is to find new ways to use blockchain technology that will improve the services we offer to our customers at Commercial Bank. Today, people want banking to be fast, convenient, and seamless and that is what we strive to offer.”

David E Rutter, CEO of R3, said: “R3 has built a global ecosystem of firms, financial institutions and regulators to unlock the potential in blockchain technology for enterprise. We’ve come a long way in a short space of time, but we are still only scratching the surface of what blockchain can deliver for firms. Welcoming Commercial Bank as a partner is a great opportunity to fresh perspectives. We look forward to sharing expertise and input with Commercial Bank in future projects as we continue to explore the potential of the Corda platform.”

R3 recently launched Corda Enterprise, a commercial distribution of Corda specifically optimised to meet the demands of complex institutions Corda and Corda Enterprise are the foundation of a vibrant ecosystem of interoperable applications.ears of competition against other cryptocurrencies. Finally, a cash-settled futures market for bitcoin has been launched, which means that a limitless supply of fiat bitcoin can be created by futures market participants.

History and Stability

Gold has been used as a store of value for thousands of years. Since Roman times, the purchasing power of gold has been stable enough that people say an ounce of gold can always be used to purchase a good suit.

While one might argue about the definition of what a “good suit” is, the idea behind this adage is that the purchasing power of gold has remained constant over a long period. Barring discovery of an enormous deposit on Mars, gold’s purchasing power should not change significantly. Meanwhile, bitcoin investors are, for the most part, investing in technological disruption.

Bitcoin investors are hoping for fantastic profits, expecting that bitcoin will supplant gold and the U.S. dollar as the world’s pre-eminent monetary asset. If bitcoin bulls are correct, bitcoin will indeed generate fantastic returns. However, this investment thesis makes bitcoin a speculative asset rather than a store of value, which is why bitcoin’s price went up in price by 1,331% in 2017 only to go down by 72% during 2018. While bitcoin might be a profitable investment in the long-term, bitcoin’s price is just too volatile to reliably serve as a store of value.

Official Support

Central banks and governments across the world own gold as a reserve asset. Moreover, since the Financial Crisis, central banks and governments have been buying more gold in order to diversify their currency reserves and reduce their reliance upon the U.S. dollar as a reserve asset.

Central bank gold purchasing has accelerated recently, which suggests that the use of gold as a settlement asset among countries is likely to increase in coming years. If central banks are buying gold because they believe gold can serve as a store of value, why should investors act differently?

Meanwhile, central banks and governments do not own any bitcoins or any other decentralized cryptocurrency. Indeed, the bitcoin bull case assumes that bitcoin usage will destroy central banks and the banking system. Because bitcoin operates perfectly well without any central authority, even the IMF has acknowledged that crypto assets represent a potential threat to central bank money. In response, central banks have been considering the introduction of central bank-issued cryptocurrencies, such as FedCoin. It seems impossible that central banks would buy or hold a cryptocurrency that central banks would not issue and control themselves.

While bitcoin may be an attractive opportunity for some investors, it should not be considered a reliable store of value in your portfolio. With bitcoin, you should only invest what you are prepared to lose if the bitcoin price should go to zero. If bitcoin does not succeed in supplanting gold as a store of value, bitcoin is likely to have little to no value whatsoever. This warning alone prevents bitcoin from being considered a store of value.

Meanwhile, gold does not appear to be going anywhere right now except into the vaults of foreign central banks. With the U.S. dollar likely to depreciate in the coming five to ten years, the dollar-denominated gold price would likely appreciate accordingly.

For multiple reasons, gold deserves a place as a reliable and liquid store of value in most people’s investment portfolio.

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