Looking down the blockchain | CUNA news
The world is still figuring out what blockchain and cryptocurrency are, and what social applications the new technologies have.
If the community at large is still trying to figure it out, so are credit union members. Dr. Lamont Black, an associate professor of finance at DePaul University, believes credit unions can live up to their mission of financial well-being for all by helping members through this process.
“Credit unions’ key value proposition regarding crypto is as a source of trust. There are people who want to engage with crypto, but it’s hard, it’s scary. A lot of them might look at you to say, ‘Hey, can you help me with figuring this out? Should this be part of my portfolio?’ ” says Black, who spoke Sept. 23 at the 2022 CUNA Operations & Member Experience Council and CUNA Technology Council Conference in Las Vegas. “Help them learn and explore.”
While credit unions can immediately begin educating members about cryptocurrency and how it fits into a wealth management strategy, education and investment aren’t the only uses.
“It’s not just a number going up and down on my phone and then I’m either happy or sad,” says Black. “It’s not crypto. It’s so much bigger than that.”
Cryptocurrency is just an application on a platform. The platform – and what Black considers the true technological evolution – is the blockchain. The decentralized ledger allows for shared record keeping which opens up possibilities for many more applications.
“It creates a single source of truth,” says Black. “The world we’re trying to get away from is reconciliation. The blockchain turns that on its head and says, “instead of cleaning up afterwards, let’s agree on what goes into the ledger.” It is a front-end coordination effort. Instead of having a single authority telling you what is true, we have a decentralized network that agrees on what is true.”
Theoretically, a credit union member could hold physical assets such as an auto loan on the blockchain as a non-fungible token (NFT), a digital record of assets. It will allow for an agreed set of data, rather than requiring coordination between buyer, seller and financier information. If the vehicle is sold again, sales records will be available on the blockchain.
Other potential credit union blockchain applications could be offering membership as an NFT, using decentralized funding for secured loans, and finding space in the metaverse to hold member engagement activities.
Black is also reimagining the digital wallet as a combination of the current digital wallet, which stores and enables crypto and NFT transactions, and the virtual wallet, which stores and enables US dollar transactions. Merging the two could lead to one digital wallet containing dollars, central bank digital currency (CBDC), US government-backed digital currency (USDC), bitcoin, ethereum and NFTs.
That mix is how Black envisions the future. Rather than crypto or traditional currency enveloping the other, he believes both will have a place in society.
“These two worlds are converging, not diverging. They’re going to continue to evolve and move toward each other,” he says. “The question is how quickly we evolve from here to the future. Start fostering a culture of innovation.
“You have to create a strategy, even if the strategy is ‘we don’t do that.’ You can’t just bury your head and hope it goes away. This is an emerging ecosystem,” he continues. “Start exploring. It doesn’t have to be all or nothing. It’s about how we take the existing and combine it with the new.”
