Blockchain – Another Hype or a New Technology

Banks are looking at blockchain technology as its core underpinnings appear to have a number of useful features – it is difficult to hack, it can’t be shutdown, transactions cannot be reversed and it is end-to-end transparent.

However, many of these features also have their demerits. Transaction transparency may not be ideal in the world of banking. This could allow rivals to view each others trading activities. Irreversible transactions could make correcting errors cumbersome. A transaction accidentally entered with three additional noughts (yes it happens) could be disastrous.

There is also a question around whether the technology scales. With data being replicated across all entities using the same shared settlement platform, the system may bloat – the more bloat the slower the system will run.

These problems are all able to be resolved. A “fat-fingered” trade could be reversed, for instance, by entering a mirrored trade – but the question still remains: is blockchain really suited to the wholesale FS vertical, or is this another technology being hyped and about to descend into the trough of disappointment.

Perhaps underlying this there is a bigger question…is blockchain really a significant new technology or is it really another distributed database over-layed with a couple of “anti-tamper” features. I suspect the latter.

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