Over three years have passed with billions of US dollars invested in the technology. Yet, no companies have demonstrated the commercial success of the Blockchain and its applicability to the general consumer base.
In 2014, Blockchain technology was introduced as the technology which underpins Bitcoin. While it is true that the Blockchain is one of the main technologies that support the Bitcoin network, its primary role is to operate a ledger of transactions. Simply put, Blockchain technology’s purpose within Bitcoin is to operate as a database for payments.
The idea or notion of banks and financial institutions that replicating the structure of the Blockchain and creating a new system around it to compete with Bitcoin is flawed. Mainly because of the lack of other important components in Bitcoin that synergize with Blockchain technology to create a $20 bln financial network.
Since late 2016, banks, financial institutions and corporations have announced successful testing of Blockchain technology claiming to have demonstrated the potential of Blockchain within various industries. Yet, no companies have implemented Blockchain technology on a commercially successful scale. In other words, the so-called “Blockchain technology” currently being developed by banks and financial institutions have no real active users.
Some consortia such as R3CEV were honest to its investors and clients to admit that it is no longer a Blockchain company. Instead, the company is focusing on the development of a Blockchain-inspired technology, which is more applicable to existing technologies in the finance industry.
The truth is, the IT infrastructure of the finance industry is significantly outdated to the point in which almost any modern technology would dramatically improve the performance and operations of financial service providers.
What is Actual Blockchain?
Public and open source Blockchain platforms exist such as Ethereum and Bitcoin which developers can build applications on top of. While the Bitcoin Blockchain does not have an efficient and favorable development framework for app developers, it provides an unprecedented level of security.
On the contrary, the flexibility-focused Ethereum platform provides developers a viable development framework with various functionalities such as smart contracts to develop innovative decentralized applications.
Private Blockchain networks and platforms have failed to show any sort of potential in the past two years for two major reasons: security and regulatory conflict. Banks can’t implement public or open sourced Blockchains that are decentralized in nature due to regulations on money transmission. Also, banks can’t implement a private Blockchain network because of severe security issues that follow. For instance, with a private Blockchain network, immutability isn’t guaranteed and the Blockchain is no longer unalterable.
An alterable and vulnerable Blockchain network poses no difference to a conventional database.
Currently, banks and financial service providers are under pressure to demonstrate the potential of Blockchain. Such urgency could explain their interest in public Blockchains such as Ethereum and the creation of the Enterprise Ethereum Alliance.