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Answering the overhanging questions on blockchain tech

Posted: 15 February 2017 | Ryan Rubin, Managing Director, Protiviti | No comments yet

In a Q&A with Protiviti’s Managing Director, Ryan Rubin, we found out his views on the ways in which blockchain could be set to change the banking and payments landscapes, as well as how long it could take to reach its full potential…

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In what ways could blockchain overhaul banking and payments?

Ryan Rubin, Managing Director, Protiviti

Ryan Rubin, Managing Director, Protiviti

If implemented in full force, blockchain has the potential to disrupt traditional centralised models and move them towards decentralised communities that are not governed by only a few market players. Through the transparency that the technology provides to transactional activities, the opportunities for better fraud risk management, easier identification of market participants (e.g. for AML or e-commerce), audit trails and clarity on market activity could significantly benefit participants within the marketplace, i.e. those involved in carrying out payments, auditing payments, facilitating payments etc.

Remember, though, the blockchain isn’t likely to work in all banking and payment use cases. For example, batch processing of payments to bank accounts or real-time credit card transactions are taking place in micro-seconds today. If we contrast this for example to Bitcoin currency transactions through its underlying blockchain, these are taking place in orders of minutes rather than microseconds. However, the blockchain may also enable certain use cases that have been difficult to implement in the past, for example secure exchange of cryptographic keys that are used for identifying individuals or encrypting email messages.

How long before we can expect widespread adoption of the technology?

I anticipate seeing ‘pet projects’ to continue to be adopted over the next two years within smaller communities with wider adoption most likely at least two to three years away. The adoption rate will depend highly on the attractiveness of the technology¬†to participants in the community with which it will be used, and also the willingness for incumbents offering legacy/alternative platforms to bring it in or attempt to block it out.

My advice for incumbents is to investigate and embrace blockchain technology where applicable and potentially run parallel activities, both blockchain and legacy, to learn the benefits and weaknesses that this disruptive technology has to offer.

Is there danger of a slowdown in investment in blockchain before it reaches its potential?

There is always a risk that this could happen. If investment decisions are driven by the perception of instant short term value being created, investors may be disappointed. As with other emerging technologies, blockchain will also go through a typical ‘hype cycle‘ where I believe we are edging to the top of the ‘hype curve’ before entering the ‘trough of disillusionment’ and emerging into the ‘enlightenment’ phase.

There is still a lot of experimentation in the marketplace with Bitcoin as the one compelling use case for us to reference. However, a lot of the real blockchain investment currently within average organisations is the time taken out to trial the technology, which I believe is a healthy thing for companies to do in order to continuously innovate and explore new technologies as well as alternative models of doing business. Those involved in building enterprise infrastructures that will support the underlying blockchain platform have the most to gain and/or lose through blockchain technology investment.

Is the hype comparing the disruptive power of blockchain to that of the internet justified?

Personally, I would not equate the disruptive power of the blockchain to that of the internet. I would, though, compare and contrast the adoption of relational databases, such as Oracle/SQL, to blockchains as another channel for storing and organising transactional content which has the potential to support multiple use cases for distributed ledgers in the future.

Can the security fears surrounding blockchain be overcome, or are they overblown?

There are two questions embedded in here which I would like to respond to.

The first relates to the security of the algorithms used to underpin the blockchain. To date, there has been no formal challenge by the internet or research community to the approach developed and adopted for this technology, despite the algorithms and approaches having been published for several years. However, this question remains an open one until further formal research and analysis takes place on the underlying algorithms themselves.

The second is easier to conclude on and relates to the implementation of the blockchain itself. Here, along with other emerging technologies, I believe there are still potential security flaws in the implementation of software. Similar to other software platforms, blockchain implementations will require a level of maturity to ‘iron out the wrinkles’ and move towards a more steady state of security as software iterations continue to develop and are tested against real world security threats. The real answer however is that fears may be real or unfounded depending on what is potentially at risk should a blockchain be compromised which will highly depend on what it is being stored within it and what it will be used for.

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