Blockchain is hitting all the deadlines these days but progress is not evident. Blockchain projects backed by big names may be flooding the blockchain news outlets these days, but the projects that are being started seem too small and do not completely employ the innovation that is promised by blockchain.
All show and no go?
While discussing all the new projects, one may not find them up to the expected grandeur of blockchain technology. Even the well-funded projects may seem like a cautious “dipping of the toe” into the blockchain waters. However, it is important to understand that this is how “blockchainization” of finance will happen. Shaking the financial institutions and changing their core functionalities significantly through blockchains will drastically impact the banking sector.
No bank is going to invest in a new concept that is relatively untested. This can be seen as a good thing, given their operations’ systematic importance in our society.
Why so slow?
Small scale developments that will allow banks to test the technology with a manageable scope and generous budgets. This will also be easier for the regulators to accept the new technology. A sweeping change in the technology would scare overseers into taking preventive measures.
A number of banks are currently backing blockchain projects. A Corda-based pilot program has been announced by the Spanish Bank, BBVA, earlier this week. The pilot program is aimed at improving their Foreign Exchange (FX) matching. BNP Paribas also stated that they are working on improving their corporate action announcements by developing a blockchain-based system. The bank is not using blockchain technology to execute actual payments and slips, rather to improve how well they can verify and secure the delivery of the content.
Similarly, a number of other bank-related news have dominated the headlines in the past few weeks. Large financial institutions are looking into potential blockchain applications for smaller sections of their services.
Implementing these small projects step-by-step, and scaling the operations where possible, will eventually coalesce to reveal the full potential of blockchain technology in the financial industry.