Blockchain: a too complicated solution?
While accounting and transactions have experienced changes through Blockchain over recent years, and many uses of the technology have been identified in spaces such as healthcare, arts, and finance, doubts are emerging.
Despite Venture-capital investment volume in block chain reaching $1 billion in 2017, and the finance industry spending $1.7 billion annually, evidence for economic use is limited; scalability remains an on-going concern. Large amounts of investments have not yielded substantial outcomes. Early development, led by financial services, envisioned large benefits in trade finance, derivatives netting and processing, and compliance. Insurers soon followed seeing potential in underwriting and fraud, and even automakers saw a future in blockchain for lease and hire agreements. Yet, as the technology is developing, experts are complaining about overall instability, costs, and complexity.
These characteristics might not be too surprising, per se, as early-stage technologies have suffered from similar issues in the past. An overwhelming portion of blockchain startups are stuck in the proofs of concept and pioneering mode, failing to get Series C funding. The caveat behind the competition in blockchain technology might be the culprit; blockchain technology might provide a more complicated alternative to a problem more easily solved differently. A large portion of financial technology startups (fintech) provide alternative payment solutions, casting doubts on the viability of the technology.
Going forward, organizations must start with the problem. Unless there is a specific pain point, blockchain’s chance of becoming a practical solution are slim -- it must become the simplest solution to succeed. Besides a strong rationale, significant capital and increased standardization are vital factors required for widespread blockchain use.
Keith Knutsson of Integrale Advisors commented, “the mood in financial services has most definitely shifted towards a more cautious one. While blockchain remains promising, some of its initial shine has worn off.”