Same Oil, New Bottles – Blockchain and the Trough of Disillusion

“Blockchain is the most significant innovation …. since double entry bookkeeping as introduced 700 years ago” declared IBM’s Juerg von Kaenel in the January 2017 Australian publication The Future of Blockchain …..and indeed it might be.

Alternatively, this bold assertion could mark the all time high in the over-hyping in, what is in reality, an aggregation of old ideas.

At the risk of pouring cold gravy over everyone’s Blockchain hot roast beef sandwich, exactly a year ago we detailed that regulatory hurdles, legal considerations, operational risks, privacy concerns, and security issues that would prevent this “significant innovation” from being widely adopted.

Not that we were the only ones.  Multiple projects such as Bitcoin and Monero stated numerous times that distributed ledger technologies based on Blockchain weren’t suitable for processing the very large data sets such as those required in financial services.

Indeed even the staid, conservative, “couch everything in accommodating language” banking regulators have been waving red flags wildly above their heads, shouting “Whoa! Whoops! Watch-out!”  over and over again for some time now.  Take this statement from the BIS Committee on Payments and Market Infrastructures “Distributed Ledger Technology in Payment Clearing and Settlement” (page12)

“the speed of transaction settlement within the infrastructure itself may be slower.  For example, DLT arrangements may take longer to achieve settlement when compared with real-time gross settlement systems”

It seems the arctic winds of reality may be penetrating the window seals of marketing causing even the most ardent Blockchain advocates to sharpen their focus .  This is evidenced by R3CEV, the largest Blockchain consortium yet assembled, backed by the behemoths of the financial services industry – announcing “Blockchain cannot be implemented into fully regulated markets” effectively admitting the technology is non-applicable in the banking vertical.

As with SOA a decade ago, the potential impact of the technology has been massively overstated in the short term and will, in all probability, be significantly under-estimated in the long term.

In 2006 SOA was heralded as “the new paradigm in system management” – soon after to be described as “Snake Oil Applied” as implementation after implementation failed.  SOA, however, was the precursor to Cloud, now a critical component of virtually all aspects of the 21st century living, including the daily operation of business and government.

The same will be true of distributed ledgers.  Whether these will evolve as an “immutable” record based on the chaining of blocks of transactions, or more simply as a distributed database with a some form of encryption overlay has yet to be determined.

Undoubtedly there is a future for distributed ledgers, but for those evangelists who envisaged Blockchain as being the guiding light to some sort of a ubiquitous  Cyber-Valhalla, the trough of disillusion awaits.

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