According to Gartner’s 2016 Hype Cycle for Emerging Technologies, Blockchain has hit the peak of inflated expectations and is well on its way to disillusionment.
Nevertheless Blockchain is still a favourite buzzword in many circles, and we’ve even blogged about it before (buzzword or real deal?) but now Westpac and the ASX have both come out calling Blockchain ‘overhyped’.
Cliff Richards, the ASX’s General Manager of Equity Post Trade Services told the FST Media Future of Banking & Financial Services conference “Don’t believe everything you hear about blockchain. It is ridiculously hyped.”
“If you can solve your problem without distributed ledger technology, continue to do so. I’ve had people in large organisations say they need to put blockchain in the business case because that’s how they’ll get the money. Not a good reason.”
Westpac Institutional Bank’s head of Innovation and Implementation Mike Baldwin described Blockchain as a “solution looking for a problem” - a “completely backwards” approach to innovation.
“Nobody really knows how long it’s going to take to get to [mainstream adoption]. And I think that’s the key for distributed ledger technologies - if they only make it a little bit better than what we have today, I don’t think any of us are going to be able to justify the cost, the time, and the effort to bring it to market,” he said.
Both Westpac and the ASX are taking different journeys towards implementing Blockchain technology, with the ASX becoming one of the best examples of practical uses for the emerging technology.
The ASX has partnered with firm Digital Asset to replace its CHESS post trade equities systems with a private and permissioned distributed ledger system.
Richards told the conference that the ASX had spent a lot of time understanding the potential friction points and growth areas of blockchain, to make sure it was the right solution.
Amongst a “laundry list of benefits” the ASX identified blockchain’s ability to handle two traditionally big problems with capital markets: double spending and fractured data.
According to Richards, the real problem with current capital markets is fractured data, an often manual process that means organisations don’t identify errors in their books until much later, either end of year or during reviews.
The stock exchange's blockchain solution involves what it calls a “global sync log” where all separate data stores are kept in “perfect, real-time sync”.
Westpac have had less success with Blockchain, being involved in three different proof of concept projects with start-up company Ripple.
While Blockchain could potentially make transactions quicker, there are a lot of laws and red-tape that banks globally need to comply with, let alone the process of getting all these corporations to work together.
So while there are some theoretically amazing benefits of blockchain, it is still a long way from becoming part of our everyday lives, with Gartner reporting it is still 5 – 10 years away from mainstream adoption.