Industry Waits for Blockchain 2.0
Even after a few years of non-stop blockchain evangelization, Wall Street still needs to wait a few more years before it sees mass adoption of the technology, according to leading blockchain experts.
The industry is in the equivalent of the third grade regarding the blockchain’s maturity, according to Michael Novogratz, chief executive, Galaxy Digital Capital Management and who spoke during the Finance Disrupted conference recently hosted by The Economist in Manhattan.
“The technology remains new and most of the public blockchains are way too slow for anything but proofs-of-concept,” he said.
Many blockchain backers and participants have found a workaround the performance bottleneck by establishing side chains that process transactions in a centralized fashion before hashing the transactions onto the original blockchain.
“It is a short-term fix,” noted Novogratz. “It will be two to five years or three to six years when computer software can catch up and be able to process millions of transactions per second.”
However, the first-generation blockchains have been viable for cryptocurrencies, which has been the dominant use case of real people in the real world, according to fellow panelist Amber Baldet, co-founder and CEO of Clovyr.
“The real successes that will come out in the next year or so is the mutualization of infrastructure, mostly for the post-trade infrastructure in the financial services industry,” she added. “That is a concrete use case like what the Australian Stock Exchange and the DTCC are doing.”
Baldet expects that blockchains eventually will act as the connective tissue between decentralized data sets.
“They will allow enterprises to cross the trust boundaries and collaborate with people that they do not necessarily trust,” said Baldet.
Enterprise blockchains likely we get a boost in their development as the two leading industry blockchain organizations, the Enterprise Ethereum Alliance and the Hyperledger open-sourced project, have cross joined their organizations at an associate level.
The two organizations are not identical as the Enterprise Ethereum Alliance is a standards body and Hyperledger is a code repository for multiple blockchain-related projects.
“The initial goal was to smoosh everything together as enterprise blockchain, but technology does not work just by smooshing it together,” said Baldet. “There is going to be a lot of politics, commercialization, and technical work that needs to happen before we have some sort of de facto stack that businesses can use.”
The network is driving adoption of standardized post-trade swap data models and workflows.
The market maker will contribute real-time crypto market data before expanding into equities.
Pyth is built on a blockchain to handle receipt and distribution of fast-moving data.
Interoperability with current capital markets infrastructure is a challenge.
Investors have more understanding on the operational side of crypto markets.