How Community Banks Can "Hook on to the Blockchain"

How Community Banks Can "Hook on to the Blockchain"

By Ted Clouser, PCA President | CEO

Should community banks be engaging in blockchain, cryptocurrency and NFTs already? Blockchain is defined as: “a system in which a record of transactions made in bitcoin, or another cryptocurrency are maintained across several computers that are linked in a peer-to-peer network.” A growing market during the pandemic, NFTs (non-fungible tokens) are stored in a blockchain and certifies the digital asset to be unique and therefore not interchangeable.

I began researching NFTs this month and recently had the opportunity to go to a Peter Lik Fine Art studio. For four decades, Lik has been the leader in nature and panoramic landscape images. What does this have to do with community banking, you may ask? Well, the first thing I asked myself is “why would I pay $250,000 for a picture that I literally could just take a picture of?” Albeit that’d be frowned upon in the store, but let’s say I did buy one – perhaps one a bit more realistically priced for me – say to the tune of those entry level $6,000 ones. What prevents you from coming to my house, taking a picture, and reproducing your own?

Enter NFT Artworks. It’s just another opportunity for cryptocurrency and blockchain to make their mark. And when a mark is made, there’s an opportunity for the community bank to play a role in helping it accomplish those goals.

A little history – this isn’t ‘new’; it actually started in 2014 when two guys “….hacked together a first version of a blockchain-backed means of asserting ownership over an original digital work” as Anil Dash, one of the creators, said in his own words. NFTs are now a billion-dollar market after taking off this year. Check out the National Basketball Association’s Top Shot NFTs ( – it’s a fascinating concept and opportunities abound.

Dash said: “But the NFT prototype we created in a one-night hackathon had some shortcomings. You couldn’t store the actual digital artwork in a blockchain; because of technical limits, records in most blockchains are too small to hold an entire image. Many people suggested that rather than trying to shoehorn the whole artwork into the blockchain, one could just include the web address of an image, or perhaps a mathematical compression of the work, and use it to reference the artwork elsewhere.”

This is where I believe financial institutions can capitalize. We all know the value and power of the community bank. The agility and capability to flex is what makes you special. And this is exactly where I believe that the opportunity lies.

Currently, blockchain has no everyday use for a typical consumer. The options are endless in theory, but this decade-old technology still is not being leveraged. It’s highly probable that not a single smartphone app that you’re using is built on that technology – yet. Contrast that to the growth the web had in its first decade, and you’ll recognize the potential blockchain has.

There are billions of dollars invested in cryptocurrencies with no real way to currently spend it. Can the community bank provide the solution? Right now, there’s the opportunity to purchase art but what about a car? Or a home? Or a building? What’s preventing it from happening? Elon Musk has already once allowed Tesla to accept bitcoin payment – it is a matter of time before it comes back. The opportunities abound for an innovative financial institution to capitalize on it.

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