Blockchain won’t change the world — at least not in 2018
- Blockchain technology may have matured some, but most companies are still working on proving it actually works
- In the year ahead, people we need to slow down and rethink some of the basic characteristics of the technology (specifically, its so-called immutability)
For what’s basically database technology, a lot of company leaders sure treat blockchain like some sort of panacea. It will decrease fraud everywhere from fashion to advertising to financial transactions. It’ll save everyone money. It’ll give everyone the same unchangeable record to view putting everyone on the same page and making work more efficient. Blockchain to the rescue.
Not so fast. The technology may have matured some, but most companies are still working on proving it actually works, determining why they really need to invest in it and even struggling to identify which of its attributes they like. This technology may be a game changer, but it won’t amount to much in 2018.
“The argument is that blockchains can automate, systemize and routinize what all those companies are doing today and end up with a lot more cost effectiveness for the advertising brands,” Brian Behlendorf, CEO of Hyperledger, says of the advertising industry. “That’s an optimistic take, I think that’ll take more than a few years to do.”
Different industries looking at blockchain technology are in different places in their understanding of it. But there are a couple things to keep in mind in this space in the year ahead. First of all, it’s still in its infrastructure phase. Even if blockchain is a “revolutionary” technology, building infrastructure is difficult and can take years to perfect. There’s a reason it took decades after the launch of the Internet to get the version of Facebook we have today.
In the year ahead, people we need to slow down and rethink some of the basic characteristics of the technology — specifically, its so-called “immutability” that ostensibly prevents any transactions recorded on a blockchain from ever being reversed or changed.
“It’s far too absolute,” says Angela Walch, associate professor at St. Mary’s University School of Law and research fellow at the Centre for Blockchain Technologies at University College London. “Humans continue to play very important roles in governing these technologies and that trust remains a vital part of these technologies.”
People in industries that are farther along in developing blockchain-based infrastructure, like financial services companies, know now that not all blockchains are immutable, which is why they’ve begun building “permissioned” blockchains, where a known group of parties come together to do record-keeping together.
That’s what makes the fact that there’s been a resurgence in interest in public blockchains so significant — and it shows how much more exploring there is to do before blockchains go to market. The financial industry was the first to respond to the digital currency bitcoin in 2014 because of its connection to money and the negativity and hostility coming out of financial services providers fueled the fascination in the technology underpinning the then-nefarious sounding bitcoin: the blockchain.
The main thing to watch for, Walch says, is the mainstream financial system incorporating cryptocurrencies into financial products that everyday people will be able to access — as opposed to signing up to a bitcoin exchange to buy some bitcoin themselves. It’s beginning already with the massive creation of hedge funds investing in cryptocurrencies, like CME Group offering bitcoin futures trading.
“My sense is it’s one of those things that finance is jumping into blindly just to make returns rather than thinking carefully and necessarily fully understanding what they’re doing.”