Blockchain has the potential to transform our economic and social systems, but such a transformation is still many years away. Like the Internet, blockchain is a foundational technology, whose adoption process is gradual, incremental and steady, unlike the hockey stick adoption we typically associate with disruptive technologies as defined by Clayton Christensen 20 years ago. Foundational transformations must overcome many barriers - technological, organizational, governance, political - which is why they take a long time to play out.
When was blockchain created?
In October 2008, Nakamoto published a paper on The Cryptography Mailing list at metzdowd.com describing the bitcoin digital currency. It was titled Bitcoin: A Peer-to-Peer Electronic Cash System. In January 2009, Nakamoto released the first bitcoin software that launched the network and the first units of the bitcoin cryptocurrency, called bitcoins. Satoshi Nakamoto released the Version 0.1 of Bitcoin software on Sourceforge on 9 January 2009.
Nakamoto claimed that work on the writing of the code began in 2007. The inventor of bitcoin knew that due to its nature the core design would have to be able to support a broad range of transaction types. The implemented solution enabled specialised codes and data fields from the start through the use of a predicative script.
The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the blockchain as an efficiency improvement to be able to collect several documents into one block.
When will we see blockchain make an impact?
Daily I read articles about new use cases that are being built on top of blockchain technology. I believe it’s only a matter of time 2-5 years before the value and overall adoption of blockchain technology begins to make an impact universally.
According to Deloitte, 2017 could be a “make or break year” for blockchain.
Amidst all the excitement and grand predictions about the potential of blockchain, it’s important to acknowledge the obstacles that could inhibit the growth of the technology. One of the biggest potential challenges is regulation. For example, if distributed ledgers with no single location are more commonly used in the financial services industry, what does that mean in terms of regulatory jurisdiction and liability?
Other possible hindrances to the implementation of blockchain include the need for efficient collaboration and making the business case to justify transition costs. According to McKinsey, the combination of these various issues means it could be another five years at least before the technology brings about widespread change in the financial system. The company also stressed that blockchain is not a “silver bullet solution for all the pain points in the industry”.
It’s beyond question that blockchain has the potential to have a huge impact on financial services. However, it’s also clear that it will be at least a few years before the technology really starts to exert its influence across the industry. If 2017 indeed proves to be a make or break year for blockchain, we will have a much clearer idea in 12 months’ time just how revolutionary the technology will be.