OPINION: How to Kill Blockchain
Tired of reading about blockchain? It has gotten more hype over the past two years than any other technology in recent memory, save the Internet in the 90s.
Maybe it would be better if someone killed it in its crib before it can crawl, walk, and eventually run. If this is going to happen, it will need to happen fast.
After the past few years of promises and proofs-of-concept, distributed ledger technology likely will be deployed in production at scale and across asset classes later this year, according to Charley Cooper, a managing director at R3 and who attended the CFTC’s Technology Advisory Committee this week.
He did not cite specific projects, but he hinted that there would be significant news in a matter of weeks.
Once the first few DLT implementations are in production and the industry sees the increased efficiencies as well as the lowered costs and operational risk, the jig is up, and it will be with the industry forever.
So how do you kill blockchain? Treat standards and interoperability as an afterthought, keep the regulators out of the kitchen until a DLT project is fully baked, and treat it like a panacea.
At its core, distributed ledgers just are databases that replicate any changes made to them to other instances of the same ledger. There is nothing associated with the technology that dictates in which format it should store the data.
To cap the usefulness of distributed ledgers, ignore initiatives like ISDA’s Common Domain Model, which seeks to create a standard post-execution trade lifecycle framework. Let each jurisdiction put its own imprimatur on the project. The benefits of harmonization are hugely overrated. This also holds true with for any discussions regarding governance models
Secondly, do not follow the steps of the UK’s Financial Conduct Authority, Singapore’s Monetary Authority, or the Bank of Canada that are working closely with private industry to develop DLT-based projects within their respective jurisdictions.
If regulators get involved in the early phases of projects, they will have a better sense of project’s goal and scope, which could lead to better-informed regulations down the road. It would be better to leave them be until you finish the project and present it with a ribbon tied around it.
Finally, if a little DLT is good, then a lot of DLT has to be great, right? Nothing kills a new technology better than using it everywhere for everything poorly.
It might be a difficult task since the industry already has gone through two years of proofs-of-concept and has a good sense where DLT can bring benefits.
Only look at the Depository Trust & Clearing Corp.’s re-build of its Trade Information Warehouse. The industry cooperative decided in January 2017 to adopt a cloud and DLT architecture and has nearly completed its initial phase with the help of IBM, Axoni, R3, and its clients.
If they can complete this phase and determine how to minimize the impact that it will have on market participants as well as the operational risk associated with it, there likely will be no stopping it.
End this madness now.
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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.