BitCoin itself may not be embraced by brick-and-mortar banks any time soon. BitCoin, after all, was created by anarcho-capitalists to subvert the established channels of currency, making an international form of virtual money which is not beholden to any sovereign state. But even if BitCoin is never going to be the friend of big banking, many of the methods of BitCoin technology are finding their way into big banks anyway.

What problems could BitCoin technology solve?

In a word, tracking and accounting the exchange of currency on a massive scale. It is true that many banking systems are good at this already, but there’s still snags in the system. For instance, money moving into and out of bank’s ledgers is currently done in a big blob – at the end of the day, bank A’s customers paid bank B’s customers $6 million and bank B’s customers paid bank A’s customers $4 million, so they just exchange $2 million and call it a day.

Our current technology isn’t capable of tracking each individual penny and check from its origin to endpoint. In fact, the infrastructure of bank computing continuously struggles to keep up with growth and scale. Business moves at such a fast pace that there’s never time to completely replace a system, only enough to bolt on new technology integrated with the old.

How could BitCoin technology help?

Banks are looking to BitCoin’s distributed ledger system to aid with their own accounting. In BitCoin, transactions are tracked worldwide in real time by this distributed ledger system, which is a short way of saying “redundant accounting.” Each unit has a full record of what every other unit is doing, so any security penetration would immediately set off alarms and when an error happens, it’s quickly caught and corrected. Like a hivemind from a science fiction story, all of the units in a distributed ledger system think the same thing at the same time.

Banks such as the United States Federal Reserve, the People’s Bank of China, the Bank of England, the Russian National Bank, the Bank of Canada, and the Netherlands’ Central Bank are experimenting with new ideas borrowed from BitCoin. Some are only expressing interest, but others either have implemented electronic accounting methods based on BitCoin or are announcing that they’re going to implement it soon.

Does this really solve a lot of problems?

Even at its best, implementing distributed ledger systems in brick-and-mortar banking can only help so much. Optimistic estimates hold that these methods could add about 3% efficiency to existing accounting. But even 3% is a huge benefit when you’re dealing with systems slinging millions of dollars around per minute.

Critics and skeptics, however, have noted that the banking industry has jumped on the bandwagon for hip new technologies before, with only limited benefit. Again, banks have a logistics problem; any downtime is going to cost potentially trillions of dollars. Most updates and rollouts of new technology just get patched in alongside the existing infrastructure. While implementing BitCoin methods is just a matter of installing some software, integration with whole systems which have to be kept running 24/7 will provide their own efficiency challenges.