When bitcoin mining started early in 2009, many frustrated with both the restrictions inherent in traditional regulatory oversight and the recent global financial crisis predicted the birth of a new monetary order. The peaks and troughs of bitcoin valuations are still very much with us, 15 years later, but the cryptocurrency isn’t exactly used by the public for everyday purchases like a takeaway coffee or the weekly shop.
Blockchain, the technology underpinning the trust network for bitcoin, has also long entranced those who are technically minded. On paper, bundling information on the chain as a token seems to solve a range of issues. Encrypting or tokenising tradable assets, smart contracts or the numerous amounts of information needed to accompany a payment to see it to settlement, on a trusted network, can create the type of operational efficiencies and seamless straight-through processing desired by the industry.
My question is this: with blockchain or distributed ledger technology now in the middle of its second decade, why hasn’t the industry experienced the type of monumental change predicted way back in 2009? The promise and technical capabilities of blockchain are evident, but is it doomed to be the Betamax* of hyped-up technologies?
One of those conventional wisdoms, often repeated without investigation, is that new technologies are adopted at a faster rate than ever before. For example, according to Our World in Data it took almost 80 years before most houses in the US had access to running water, while electricity took around 50 years, the prevalence of colour television 20 years while smartphone usage reached 80 per cent of US households after nine years.
The panel I moderated at the Crypto and Digital Assets Summit organised by the Financial Times and The Banker last week — “Will the banking sector ever be ready for mass adoption of the blockchain?” — was cautious in its outlook, saying while many banks are looking to blockchain to create operational efficiencies and solve legacy problems, the technology is still a distant threat to well established systems such as Swift. However, panellist Justin Chapman, global head of digital assets and financial markets at Northern Trust, tried to make a point about emerging technologies that seemed to contradict the conventional wisdom above.
When asked whether the 15-year-old blockchain was still considered “a solution in search of a problem” by many in the banking industry, he made the point that personal computers started appearing in people’s homes in the early 1980s, but it would take until the late 1990s for it to reach mass appeal with consumers. That’s a span of almost 20 years to achieve ubiquity for a technology that started being sold to lay people more than 40 years ago. Again, I ask, shouldn’t blockchain today take less time to achieve the change many promised?
Diana Biggs, partner at 1kx, speaking on the “Will tokenisation transform private markets?” panel, repeated an assertion I have heard many times before. The technology underpinning tokenisation, DLT and blockchain will “fundamentally change” bank infrastructure, she said. This change “is coming”, she added.
I’m not taking issue with Biggs’ statement; she has spent many years in the decentralised finance space and is one of my go-to contacts for questions and clarifications on all things crypto. But if this change is indeed coming, when can I expect fireworks?
Back in 2015 it was common for people at banks to tell me that they weren’t rushing to spend “billions of dollars” on a technology (blockchain) that “wouldn’t be viable for a decade”.
It’s now been almost a decade and the DeFi revolution has been devoid of both destruction and celebration.
As evidenced by many of the panels at the conference last week, experiments and projects around stablecoins and tokenisation is ongoing throughout the global banking ecosystem. Blockchain is now a mainstream tool that bank IT departments can use or not use depending on whether it seems the best solution for the job.
Maybe we need to realise that not all shiny, buzzy new technologies are destined to hop a ride on a rocket ship of mass adoption. Some revolutions are slower, more cautious and as a result more sustainable. However, time will tell whether blockchain truly achieves mainstream status or will find itself, like Betamax before it, the superior offering left behind by more accessible methods and tools.
*For those of you who never experienced the joys of renting a movie on a cassette tape — be kind, rewind — Betamax was a video cassette format produced by Sony that many felt offered a higher-quality video experience compared with its rival VHS. Betamax soon lost the consumer race to VHS and was quickly considered obsolete, the irony being that VHS’s victory was short-lived having been usurped by DVDs and now streaming services for consumer content delivery.
Liz is deputy editor of The Banker. You can connect with Liz on LinkedIn, or follow her on Bluesky.
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