Or just another lesson in tech hype that hasn’t delivered?
Only a few short years ago, blockchain – and more specifically cryptocurrency – was all over the news, promising to disrupt the banking industry, save financial organisations billions of dollars, and democratise currency transactions for a new and fairer society.
Fast forward a few years and it certainly doesn’t feel like that disruption has happened yet.
Quite the opposite in fact.
We’ve heard of large banking organisations ploughing millions into blockchain-based prototypes, yet to show any real returns or business impact.
We’ve heard the horror stories of consumers losing their lifetime savings to the likes of the now infamous Crypto Queen.
And yet beyond the negative publicity, blockchain – or the concept behind it at least – is still chugging away as organisations look beyond the technology alone and solve for tangible business and consumer problems.
This is especially true in the financial services sector where a concept known as ‘distributed ledger technology’, or DLT, is starting to take off.
Although DLT is often used synonymously with blockchain, it’s actually quite different.
With a blockchain, everyone in the ‘chain’ or network has visibility over all transactions, whereas with DLT, this isn’t always the case.
DLT is already seeing use cases in the derivatives market.
When viewed with a ‘futures’ lens, it has the potential to transform some well-established financial institutions by improving transaction transparency and auditability – benefits that blockchain technology also shares.
In fact, more open and inclusive (as well as more secure) networks are at the heart of the blockchain movement, hence the natural connection organisations have made between it and finance.
The table above shows a quick view of exactly how blockchain can be used across the financial industry.
Its applications are both wide and deep.
And the opportunity blockchain affords in reducing what is currently a complex and risky system is sure to attract attention.
It even opens up the possibility for new types of financial product – something that both Fintech startups and global business giants are already jumping on.
Does Blockchain really still hold huge potential?
A Deloitte report carried out in 2020 shows that blockchain does indeed still hold huge promise.
55% of organisations surveyed in the report saw blockchain as ‘critical and in our top-five strategic priorities’ for the coming 24 months.
88% believed that blockchain would eventually achieve mainstream adoption.
So what is holding it back?
Well, the same report pointed to issues such as cybersecurity, governance and regulatory considerations that were hindering full adoption.
Governmental or professional guidance is still continuing to surface in order to provide businesses with a safe path to follow.
Measures such as the one announced recently by the Office of the Comptroller of the Currency in the US is a great first step in how traditional banks can provide more security within a virtual assets market.
‘Blockchain fatigue’ is also a factor now starting to creep in.
The bad press over recent years has put off companies and consumers alike who were looking to blockchain as a disruptive force for good.
Negative publicity aside, the areas where blockchain can have a positive impact are still potentially untapped and may just require a bit more time.
The Internet didn’t take off overnight and the old adage still stands that ‘Rome wasn’t built in a day’.
Indeed, the Deloitte report showed that whilst global financial transactions were the area that most organisations saw blockchain having the biggest impact, health care, international travel and even law enforcement also featured, hinting towards the idea that its true applications are yet to be discovered.
So, whilst Financial Services seems to be the obvious sector for the more transactional side of blockchain, perhaps its more impactful applications lie in other areas of society that are yet to be developed.
Only time and patience will tell!