Blockchain: Is It All Hype?

Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamper with. The Evolution of BlockchainBlockchain was originally invented by an individual or group of people under the name of Satoshi Nakamoto in 2008. The purpose of blockchain was originally to serve as the public transaction ledger of Bitcoin, the world’s first cryptocurrency.In particular, bundles of transaction data, called “blocks”, are added to the ledger in a chronological fashion, forming a “chain.” These blocks include things like date, time, dollar amount, and (in some cases) the public addresses of the sender and the receiver.The computers responsible for upholding a blockchain network are called “nodes.” These nodes carry out the duties necessary to confirm the transactions and add them to the ledger. In exchange for their work, the nodes receive rewards in the form of crypto tokens.By storing data via a peer-to-peer network (P2P), blockchain controls for a wide range of risks that are traditionally inherent with data being held centrally.Of note, P2P blockchain networks lack centralized points of vulnerability. Consequently, hackers cannot exploit these networks via normalized means nor does the network possess a central failure point.In order to hack or alter a blockchain’s ledger, more than half of the nodes must be compromised. Looking ahead, blockchain technology is an area of extensive research across multiple industries, including financial services and payments, among others. Read this Term is over-hyped and so far has seen limited widespread and broad use outside the cryptocurrency world. Unless someone can find or invent a real 'killer application' for it soon, it will not evolve into the transformative technology that we were all hoping for but is likely to stay within the confines of cryptocurrency and limited applications.

We are all aware that Blockchain has the potential to solve enormous issues such as eliminating vast amounts of record-keeping, smart contracts, clearing and settlement or streamlining cross-border Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term, all on a

distributed ledger without a centrally trusted party. However, we have not seen any real wide mainstream adoption of it outside the cryptocurrency world and other than for a few experimental applications. Despite this and huge investments, we have not seen any major uptake or usage as there seems to be a lack of a 'killer application'.

The Challenges

Of course, there is no doubt that it is an interesting piece of technology, ideally suited for securing highly sensitive data and enabling parties who do not usually trust each other to share and agree on transactional information and contract details. However, for full global widespread use, there needs to be a high degree of standardisation and agreement amongst peers in the network and that is the challenge, to agree on use cases and standards for information exchange on Blockchains or distributed ledgers.

Yes, it is quite easy and technically feasible to create a complete decentralised network using Blockchain technology but getting all parties to agree on which protocols to use, which content and which type of Blockchain is a huge, seemingly insurmountable hurdle for a lot of applications. Governments and banks need to be involved in the use of Blockchain technology to become more mainstream and gain widespread use. They need to seize the opportunity and drive the market forward by creating new standards that will benefit the whole industry. If we cannot find a way to come up with standard agreements and protocols, then we cannot go down the route of a distributed ledger and all promises the technology brings.

Slow adoption is not because there are not enough Blockchain technologists and technologies, as sometimes is cited. For today’s developers, Blockchain is just another technology to learn with a new set of APIs and idioms. Developers are used to major new technologies emerging regularly. They adapt and are willing to learn - and they will get up to speed if we can find a good use for Blockchain.

There Is Still Hope

There is still hope for the technology and uses, but I am concerned that with Blockchain technology we may have created a solution looking for a problem more than the other way around. We still regularly hear of organisations making significant investments in Blockchain – in fact, IBM amongst many other tech companies is currently supporting Blockchain as the foundation on which to sell its technology, but we are also increasingly seeing examples in which Blockchain-based projects have hit a brick wall of challenges of a non-technical nature.

Lots of firms claim to use Blockchain technology as it is a buzz word which makes them sound cutting-edge, but the reality is that the market has not embraced it enough for it to become mainstream. In many use cases, Blockchain might not be needed as a distributed ledger, and consensus is not necessary for their application but used just for 'buzz'. Even the enthusiasm from investors is starting to wain; Venture Capital Funding for Blockchain start-ups dropped 35% last year to $2.79 billion, according to CB Insights.

I guess my views reflect this. Blockchain technology and distributed ledgers still have huge potential but the chances of finding the killer application after 10 years seem fairly slim at the moment – although, on the other hand, we might also just be in the 'valley of despair' after the hype and before broad adoption. Blockchain technology will undoubtedly continue to be used as the foundation within the cryptocurrency space, and there are also a few cases in securities dealing or OTC trading where trades are reconciled, cleared and settled over a Blockchain. Other than that, its use is fairly limited… although I would love to be proved wrong on this as it is an innovative use of technology and mathematics with some very interesting properties.

I am obviously following Blockchain and distributed ledger developments very carefully for Muinmos and seeing if there are areas that would benefit users of our regulatory compliance engine, such as making confidential data about potential clients more easily available during the onboarding process – but we have not seen any evidence to date that there is traction in this and I cannot see the situation changing anytime soon.

Michel André, Board Member at Muinmos and a former CTO at Saxo Bank and Chief Enterprise Architect at Nordea.