With a host of big names continuing to sign-up to the Blockchain consortium R3, Trevor Belstead at Delta Capita explains why groundwork still needs to be done before distributed ledger technology solutions become a reality.
Like the well-known biblical reference about building a house on bedrock not sand – the same could very well be said of Blockchain. From an initial group of 9 to well over 50 firms in under a year, the R3 Blockchain R&D group has come a long way in a relatively short space of time.
Consortia groups like this are certainly a welcome trend. The mere act of getting major institutions to sit down together to work on a solution is impressive, but it is not itself the answer to making the distributed ledger a reality. In fact, before financial services firms can benefit from the great potential of Blockchain, companies need to effectively address a range of pressing questions. Answers to these questions will provide that all important solid foundation on which a distributed ledger can be built.
First of all, what exact role will the regulators play? As yet, their role is undefined in deciding what changes to the legal framework and laws will be needed. Firms will also have to look carefully at the operational landscape as well as how early adopters will integrate with legacy systems. All that is even before considering aspects of security, identity or cost, revenue and ROI models. Equally, how will institutions address operational risks and failures?
With these questions yet to be answered, it is clear that there is a lot of complicated groundwork, planning and adjustment to be done before Blockchain can come to fruition. Many firms, and R3 is a great example, are making promising strides on the road to Blockchain. However, to fully prepare for it, financial services companies need to carry out an honest assessment of their future business models in the context of a distributed ledger. With that backdrop, they should further review the current challenges and their progress towards more collaboration, as well as creating shared platforms that are simpler to migrate into from current operating models. Until then, there is still no clear picture of exactly how many more bricks need to be laid, or how long it will take for the Blockchain building work to be completed.
