I came across an article by Andrew Palmer, Business Affairs Editor at The Economist.
The Technology that underlies bitcoin, a digital currency, is Blockchain. It has won attention from banks, business, investors, and regulators. But in 2017is the year when the potential of the Blockchain will start to be properly tested in the real world.
Blockchain is a "Distributed Ledger", an online record of transactions that is shared and authenticated through a series of cryptographic steps. A trusted register has the potential to cut fraud by verifying who actually owns an asset, whether it be digital currency, a plot of land, or a vote. It dangles the promise of huge cost savings: why spend time and money reconciling lots of proprietary databases when a single public version can do he job? And because it can have instructions embedded within it, the Blockchain opens the door to "Smart Contracts" that can be executed automatically without the need for pesky humans get involved.
That has got lots of people excited. Imagine clinical medical trails whose results can be stored on the Blockchain, so that they cannot be selectively reported by drug firms. Or Blockchain based voting systems that guard against Election fraud or e-commerce transactions that are programmed to release customers' payments only once a package has been tracked to its destination. Governments will keep cautiously experimenting with the technology in 2017. Australia and Russia have plans to try out voting systems and Britain will review the results of a controversial pilot program that uses Blockchain to deliver payments to welfare recipients and then track what they spent the money on.
But the real action will be in financial services. Oliver Wyman, a consultancy, reckons that banks spend more than $200bn a year on IT and fees in their capital markets businesses alone. In an industry that is struggling to pay its way, the Blockchain offers juicy savings. A recent report from the World Economic Forum reckoned that 80% of banks will have started work on Blockchain related projects in 2017.
Some are already pretty advanced. The biggest Blockchain consortium, R3 CEV, whose members include JPMorgan Chase and Citigroup, will launch a platform for setting financial transactions in the coming year. Japanese banks are working with an American startup called Ripple on a ledger for processing payments that is due to launch in the spring of 2017. Another cluster of big banks, including UBS and Deutsche Bank, are beavering away on a digital coin which can then be swapped for physical currency at central banks.
The back office of a bank is not an obvious place to look for a glimpse of the future. But the test cases for the industrial use of the Blockchain are in finance. If enough go well in 2017, the broader hype about the ledge will seem less Utopian.
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