Why are organisations so keen to bury their heads in the sand and pretend blockchain isn’t happening – it all starts with a severe case of NIH syndrome…
There are certain market analysts who would have you believe that the benefits of Blockchain technology are “Hype” and the real benefits are still 10-20 years away. There are several reasons for this:
Although many believe such firms to be thorough and knowledgeable about every leading edge technology, they are not. This is evident in a lack of participation in key consortiums and conferences and a lack of good research leading them to a parochial view of Blockchain’s Global impact which they put in print.
NIHS (Not Invented Here Syndrome)
“Coin the Term and Own the Market” has always been the mantra of some these firms. “If we don’t say it is so – then it ain’t so.” There has been at least one attempt to rename the Blockchain market “Metacoin”- “Meta” meaning “about or referring to itself.” This shows a clear misunderstanding of the market.
It’s not “about the Coin”…
…whether Bitcoin, Ether, Zcash, or any others. Again, this is a very narrow view of what Blockchain is all about. What are most important are the underlying capabilities of Blockchain technology that enable those cryptocurrencies, but also enable many other unrelated and far reaching benefits.
Blockchain is not synonymous with Fintech or Bitcoin
Currently, Financial institutions arguably stand to gain the most by adopting Blockchain technology and stand to lose the most if they don’t. The major global financial institutions, especially those in the U.S. also face the biggest challenges in getting their objectives achieved.
Blockchain technology can resolve many inefficiencies inherent in the trade settlement process that cost them and customers time and estimated $20 billion per year. There are three major prohibitive factors in achieving this:
1. Existing Technology infrastructure
Understandably financial institutions don’t want to start over redesigning their systems from the ground up so they are trying to select bits and pieces of Blockchain and integrate it with existing technology. History has shown this approach has never worked very well and could take years to accomplish if they are ever successful. This is one area where market or analyst skepticism is derived from. On this they are correct.
2. Current Legislation
Mandating human intervention and oversight in settlement processes that Blockchain can negate the need for has hamstrung efforts even more than the technology issues.
3. Ownership & Control of the processes and technology
Financial institutions want to own and control these processes via “private Blockchains” so they can make the rules and control the economy. “Public Blockchains” are like the Internet and are not controlled by anyone. We know how well “private internets” worked – remember “intranets”?
Ironically the public gave that “trusted intermediary” role to financial institutions years ago and they have abused it time after time. It was the Global Financial Crisis of 2007-2008 which motivated Satoshi Nakamoto to invent Blockchain to enable technology to do what we could not blindly trust banks to do for us. In spite of Dodd-Frank oversight legislation, the recent Wells Fargo debacle has shown that not much has changed.
With all of these challenges for Financial Institutions to adopt Blockchain technology, one might say, “Ok, now I understand why Blockchain is more hype than reality – lots of discussions, lots of promise, and a handful of promising but limited test-scenarios. Lots of investment, but not much to show.” Yes. One could clearly have that view if :
1. You didn’t look beyond the Financial Industry,
2. You thought Blockchain was the same as Bitcoin,
3. You didn’t look beyond the borders of the United States, and
4. If you ignored or were unaware of the implications of Blockchain security, record immutability, Smart Contracts, micro-units, micro-payments, and digital identification already implemented and working in many other countries in hundreds of applications across every industry sector.
Michael Shaw is CPO and Executive Board Member of Sourcing and Procurement Executives (ACSPE) and Chief Information Officer at Blockchain Executive. This article was originally published on LinkedIn.