Why Blockchain adoption has stalled in financial services and banking
oichi Ito, Neha Narula, and Robles Ali last year declared blockchain "a fundamental restructuring" of the global financial system, something that "will do to the financial system and regulation what the internet has done to media companies and advertising firms."
While it's par for the course to breathlessly tout the next big thing, a year later we're still waiting for blockchain to make an impact on anything but VC investment portfolios.
Perhaps more tellingly, the financial services firms that arguably have the most to gain from blockchain technology are still limping along in their adoption. Indeed, according to True Link Financial CEO Kai Stinchcombe, "[A]fter years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain—besides currency speculation and illegal transactions."
Both opposing views are probably overblown, but why haven't banks bought into the blockchain more actively?
To be sure, there's no shortage of hype and hope about what blockchain could do for banks and other financial services firms. As The Financial Times detailed, banks could use blockchain technology for everything from the recording and updating of customer identities to the clearing and settlement of lands and securities.
The operative term in that sentence being "could."
SEE: IT leader's guide to the blockchain (Tech Pro Research)
The reality of blockchain, however, is that they aren't. While there are patches of blockchain activity—Northern Trust using a distributed ledger to manage private equity deals in Guernsey, and ING attempting to build a blockchain for agricultural commodities—Penny Crosman, reporting for American Banker, has declared that adoption has "stalled" for a variety of reasons. The first, ironically, is that most banks still don't have a clear business case for using it. Beyond confusion as to why the banks should be using blockchain at all, there are also concerns about security, legal issues, and the immaturity of the technology itself.
I don't think that word means what you think it means...
To get past some of these issues, banks have been trying to fine-tune blockchain, with the effect that they've often undermined it by removing the very features—permission-less transactions, for example—that make blockchain blockchain.
I've talked about this before, pointing out that the banks' attempts to turn blockchain into nothing more than a privately managed equivalent of a SQL database is understandable (banks want to participate but can't give up their control issues or can't due to regulation) but also laughable. And yet it continues.
SEE: What is blockchain? Understanding the technology and the revolution (free PDF) (TechRepublic)
A significant motivation behind what tepid blockchain adoption does exist is, frankly, FOMO (fear of missing out), despite the hefty costs associated with running a blockchain. As MIT professor Christian Catalini has suggested: "Some of these platforms are developed to be kind of replicas of the old system, where the trusted intermediary has almost the same control, or exactly the same control, it would have had in the old system. And then you're wondering, why are we switching to a less efficient IT infrastructure? Because it's trendy?"
In a word, yes.
As David Floyd styled it, the financial "industry may see co-opting the terminology of the blockchain - without actually adopting the blockchain." This is where we are with blockchain in finance. Yes, blockchain could one day rule the finance world, but 10 years in, it's hardly making a dent even on a single firm, much less the broader finance industry.
source:
https://www.techrepublic.com/article/why-blockchain-adoption-has-stalle…