PYMNTS: The Blockchain Bandwagon

Originally published on PYMNTS

By Brian Billingsley

Blockchain is a method to cryptographically secure and verify ownership of something. It’s a ledger, and it’s a database. Ledgers and databases used to be hidden away in data centers — “a cop and a box,” so to speak — but now they can be hidden in plain sight, without trusting anyone or anything. The assets that you store securely and [of which you] verify ownership could be anything: a stock, rights to gold, birth certificates, commodities, shipping invoices, voting records or virtual cats (yes, really).

Wherever our business has assets that we need to secure and verify ownership of, and we can’t trust anyone centrally — because we don’t trust whomever is already there, or there isn’t anyone already there — that’s where I would be testing, conducting experiments and working with prototypes. So, for instance, if we want to store records of our legal agreements securely where they can’t be hacked or modified, and we can prove to the whole world precisely when they were stored, blockchain — or any similar secure distributed network — would be great.

As far as us jumping on the blockchain bandwagon, I don’t feel like it’s the right move for us right now. Because we are still early in the evolution of blockchain, there are multiple different blockchains focusing on solving different problems. Beginning to understand the specific value of blockchain to our business is the only valuable investment at this point. We need to start from the beginning and ask fundamental questions before choosing a specific technology like blockchain. We need be clear on:

  • What problem are we looking to solve?
  • Where is trust missing from the market or our business?
  • What elements of our business could benefit from a cryptographically secure audit trail of ownership?
  • Are we prepared to experiment, fail and learn from both?
  • Can we be confident we’re capable of making those experiments secure?

And, furthermore, we need to be clear that in a very direct way, blockchain is a standard — and sometimes standards don’t work out the way you’d hope. The crew over at Modo doesn’t think that standardization is the way to create connections between systems, interoperability is. Instead of making you choose a standard and then asking tech to conform to our systems and application program interfaces (APIs) to that standard, the good folks at Modo let and encourage the companies we work with to keep whatever standards they use today and don’t make any changes to their systems.

We can connect using any standard and any technology, no matter how disparate, using Modo’s utility for interoperability between systems. We don’t have to choose — which, by the way, also means that while different blockchain standards fight it out for market share, we will be able to grow our business and switch between the leading solutions. [We’ll be able to do that] for as long as there is not a single standard across the industry.

When it comes specifically to payments, either B2B, business-to-consumer (B2C) or consumer-to-business (C2B), blockchain is not yet a great solution for large amounts of volume, nor in sub-second timeframes. Oh, and it’s not clear exactly how the relationship between cryptocurrencies and fiat currencies is going to play out. We should be careful about going too far with cryptocurrencies and ending up with large balances of “wampum.” The payments technology that runs fiat currency payments is 40-plus years old. These systems are scaled and iron-clad, but working with other payment methods or standards, like blockchain, is virtually impossible for them.

That’s another plug for an interoperability solution, I think.

Blockchain is not going to take over payments — or any other industry — overnight, but companies will start to find important use cases where blockchain solves a real problem: maybe in things like healthcare records, or other places where a central, secure database has eluded the market. The growth opportunities will be in specific and clear use cases that solve known problems in the market, and particularly where trust is an issue. Those use cases may be small to begin with, but they will be anchors of the technology and lead to bigger use cases in the future — all of which is hard to predict.

I think the hype is real for blockchain, but the realization that interoperability can change the way financial companies relate to each other and to their customers is just beginning. It is important to remember the famous Bill Gates quote: “We always overestimate the change that will occur in the next two years, and underestimate the change that will occur in the next 10.”

No Comments

Leave a Reply