Tech Trends for 2017: Blockchain technology
2017 will see greater adoption of blockchain technology as a means to improve the structures of financial markets…
Dubbed the future of finance by some experts and hype by others, blockchain technology has the potential to completely transform global trade as we know it.
So why should blockchain be on your radar in 2017?
The first blockchain was developed in 2008 for bitcoin but, given that blockchain databases are secure by design and reduce the use of the ‘middle man’ between producers and consumers, the technology is inspiring uses among many other applications.
In December 2016, peer-to-peer property investment platform BrickVest announced that it had started prototyping blockchain technology and had filed for a patent. The company believes blockchain “can improve the inefficient structures of financial markets” and “ensure greater transparency, efficiency and higher returns in financial and real estate investments alike.”
More over, banks are now gravitating towards blockchain. R3, a distributed database company headed up by David Rutter, now leads a consortium of over 70 of the world’s biggest financial institutions including JP Morgan Chase and Deutsche Bank, to support the research and development of its blockchain products.
Speaking at TechCrunch Disrupt on December 6 2016, Rutter highlighted that “while many [financial] institutions have built their own technologies, they don’t communicate well, [using blockchain] we would be able to move all of this technology safely and securely behind the firewall.
“The way [things] work now, we record [transactions] on paper or enter them into a system […] leaving plenty of room for ‘shenanigans’ [meanwhile] the idea of hiding a ticket or manipulating a trade will be a thing of the past.”
Rutter also announced that R3 is about to close a $150m funding round in the first quarter of 2017 – evidence that investors are becoming more comfortable with the idea of blockchain technology – while London start-up Elliptic raised $5m earlier this year to help support future blockchain transactions.
Other businesses in the space also appear to be gaining traction and are set to scale further in 2017. The aptly-named ‘bitcoin wallet’ provider Blockchain reported in December that its platform now hosts 10 million ‘bitcoin wallets’ and has captured 50% of global transactions in the bitcoin crypto-currency.
How it works
PWC’s definition of blockchain technology is particularly useful:
“A blockchain—the technology underlying bitcoin and other cryptocurrencies—is a shared digital ledger, or a continually updated list of all transactions. This decentralised ledger keeps a record of each transaction that occurs across a fully distributed or peer-to-peer network, either public or private.”
Using strong cryptography that validates and chains together blocks of transactions, blockchains make it “nearly impossible to tamper with any individual transaction record without being detected.”
The benefits of these decentralised ledgers are clear: By being able to keep secure transaction records, completely independent of any authorities, you remove the middle man and can verify transactions without having to rely on one entity to keep track of balances. Transaction costs are also reduced.
However, these benefits don’t necessarily outweigh the costs; there are a number of challenges preventing blockchain technology from being widely adopted.
Recent research from BrickVest raised issues around integrating blockchain with existing regulatory and legal frameworks, the question of acceptance among banks and insurance companies, and the lack of knowledge and education among industry players.
In fact, when it came to property investors, some 66% of those surveyed said they were “not familiar with blockchain” and only 2% said they were “very familiar”.
We’re not predicting that blockchain technology will hit the mainstream in 2017 but it will certainly start to make more ripples in the financial space over the coming months.
As Emmanuel Lumineau, CEO of BrickVest, surmises: “It will be a far from straightforward journey to overcome the status quo […] but P2P sytems [like this] are the way forward.”