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Is Distributed Ledger Nirvana At Hand?

The Possible Paths to Blockchain Adoption

Entertaining conversations that spark fresh thinking, at least at business conferences, often begin in social settings. I had the opportunity to attend Dreamforce again this year and after a long day of meetings and sessions, I headed to a sponsored event eager for the meet and greet experience.

While data management and sharing efficiencies are at hand with Blockchain, the question remains how the financial industry will adopt this technology.
 

I spent the evening speaking with two people: the founder of a FinTech start up here in the Bay area, and a technically-inclined bank executive. We explored the inefficiencies afflicting the financial industry and the various new technologies aimed at resolving data management and sharing challenges. In theory, this sort of nirvana is at hand through distributed ledgers (Blockchain), enabling market participants to work from shared data sets and through streamlined and standardized operational processes.

 

There are numerous articles on Blockchain as a technology, but our dialog focused primarily on the paths to adoption. Given my role of business development with key global software partners, and the work Dun & Bradstreet is doing to house company profile information in “smart contracts” for business identity, I wanted to understand their POV on the obstacles ahead. 

After much debate, we aligned on three core avenues for Blockchain technology adoption. First, we would need to see a focused effort to shift the current value chain to distributed ledgers. The optimistic FinTech start up founder believed that an overhaul of all the core systems would take two to three years. However, the banker believed that while most banks already have such efforts underway, a more realistic timeline would run to 2025. One of the reasons for such a disparity of opinion relates to the scope of implementation. It is easier for a consortium of business counterparties (say, a group of banks or a large organization and its vendors) to enter into an agreement to adopt Blockchain than for a mature industry to make a pervasive, industry-wide change. 

Second, we discussed if key representatives in the industry could mandate a new market infrastructure standard. This approach might lessen the risk and reduce collective costs to implement a consistent technological approach. There have been recent instances of successful standards adoption. For example, Bluetooth allowed device manufacturers to share technologies among phones, headsets, etc. (which took nearly 10 years to adopt.) We need to be able to implement transformational technology faster, which requires cooperation to work through the complexity. Blockchain adds a lot of complexity. The question remains whether the value add would exceed the headwinds produced by the complexity. There are already competing “mini” versions of the capability aimed at getting around this objection. 

Finally, I posed the question of disruption from an outsider. Would it be possible to have another Uber or Square within the Blockchain arena? Could there be players outside of the core financial market ecosystem who would drive massive disruption? My new FinTech friend said, “That's inevitable, we're in Silicon Valley.” Yet, there are hundreds, if not thousands of “FinTech startups” and many of them fail quickly. The disruptor could come out with something like “Blockchain as a service” to make adoption easy, but that would also bring about accompanying risk to data, and introduce third parties to what is supposed to be a secure process. Blockchain was actually designed to be shared by everyone, not owned, so cornering this market would be extremely difficult.

When I shared this recent conversation with Anthony Scriffignano, Dun & Bradstreet’s Chief Data Scientist, he offered some perspective that layered on to the discussion with my FinTech friends. He agreed that massive disruption is at hand in the financial industry – Blockchain, cloud collaboration, and AI decision-making point to that trend. “In fact,” Anthony said, “the ‘FinTech Revolution’ has been around much longer than some people think: it has been inconspicuously unfolding since technology was integrated into financial decision-making.” 

Whether driven by mass adoption of distributed ledger systems, a cross-industry standards approach, or an as yet uncloaked Uber-like instigator stirring the pot, the industry is poised for Blockchain disruption. Blockchain’s value promise is transaction cost reduction, with benefits spanning a wide spectrum from financial savings to supply chain efficiency. Today’s new age ability for emerging technology to connect big data for meaningful insights will push the agenda forward. It will be up to those involved in making the decisions and investments to embrace the opportunity and forge their way. 

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