Bitcoin is set to become the sixth largest reserve currency by 2030, after reaching the milestone of one million transactions a day, according to research firm Magister Advisors.
Financial institutions meanwhile will spend more than US$1bn over the next one to two years on projects related to blockchains, the technology that supports the cryptographic currency.
Data from blockchain.info indicates that there are around 120,000 Bitcoin transactions per day, but this under-reports the actual total, according to Magister research.
“Reported numbers do not factor in the daily ‘off-chain’ transactions by large wallet/vault players such as Coinbase, Circle and Xapo, pushing the daily total number of transactions to around one million,” said Jeremy Millar, a partner at Magister.
Bitcoin is popular in markets where financial institutions have a smaller footprint, Millar said. In some large wallets, for example, 90% of transactions occur in developing markets.
“There are three drivers that are accelerating adoption of Bitcoin: the maturity of the technology, the range of potential applications and the move from proof-of-concept to production,” Millar said. “Vendors like Microsoft and Dell, and mature online consumer finance businesses like PayPal, accept the currency and we expect consumer and SME transactions in developing markets will drive commercialisation.”
Over the next 12-24 months, the top 100 global financial institutions will invest more than US$1bn on Bitcoin and blockchain-related projects, Magister said, with many banks reporting 10-20 initiatives.
“Blockchain is without question the most significant advancement in enterprise IT in a decade, on a par with big data and machine learning,” Millar said. “What Java is to the Internet, blockchain is to financial services.”
The initial use of blockchains is typically not to replace core infrastructure, such as wire transfers, but to complement it, often by storing meta-data in areas such as settlement and clearing. But the potential is much greater, ranging from property registries to security infrastructure and direct payments.
“Banks will initially be unwilling to remove the core infrastructure that handles the process of clearance and settlement but they will increasingly run parallel blockchain processes, evidenced by the spike in investment that our poll has identified,” said Millar.
“Blockchain is not a flash in the pan. The transparency of its processes and its array of potential applications make it virtually inevitable that it will become the default validation standard.”
