Blockchain Hasn’t Arrived Yet
Why the first “real” transaction doesn’t mean Blockchain has arrived!
By Trevor Belstead, Delta Capita
From the Laserdisc to the Minidisc, history tells us that the latest technology craze doesn’t always lead to long-term success. This is why, despite French asset manager Natixis claiming to complete the first distributed ledger transaction in fund distribution, blockchain currently has more in common with Betamax than it does with a truly transformative technology.
Much in the same way that the minidisk was a positive precursor to the iPod, nobody can deny that executing live transactions isn’t a step in the right direction. But with multiple security breaches over the past year, including a hack on Bitcoin Hong Kong exchange, the industry can ill afford not to cast a sceptical eye over the technology. Even the Bank of England came out recently claiming the platform is not yet mature enough from a regulatory and compliance perspective.
All this begs the question – is the sheer complexity of a distributed ledger necessary to achieve what financial markets are looking for? Or, is the complexity opening up more floors in market structure today? To find answers, the industry has to start looking at blockchain through a more pragmatic lens. And at root of the problem restricting mass adoption is industry collaboration, or should that be the lack of. Unfortunately, the sector is taking far too long to operate collaboration and utility models, as too many market participants still feel they can do everything themselves. The problem is that while the platform may well be the solution to collaboration, it certainly is not the catalyst to it.
Therefore, for the industry to benefit from the technology beyond completing the odd transaction, it needs to start looking at the platform as a means to try and collaborate, rather than using it independently. Crucially, this needs to involve the right sort of collaboration. Too many projects to date, such as R3, have seen too many big banks pull out due to lack of delivery, control and direction. This defeats the whole point of collaboration and utilisation models, which should involve the industry working in tandem to overcome the operational and compliance barriers currently holding blockchain back.
A successful collaboration and utilities model should not start in the interest of one major bank, it should begin in areas where common complexities reside and there is no competitive overlap. A good example of this is KYC using distributed ledger technology, a platform built over the mutual convenience and security of the distributed ledger, which allows users to manage their identity securely. As there is mutual interest among banks in this space, the regulator is much more likely to engage. After all, if a firm can have its identity stored on a distributed ledger with no breach to the rules, what regulator would not be happy.
Key to ensuring these collaboration models work, and ultimately making the distributed ledger a sustainable proposition, is having an independent party facilitating operations. With this in place, the legal and competitive barriers surrounding it may just start to breakdown, giving blockchain the best possible chance of becoming the iPod of the market structure world, and not the next Minidisc.
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