Last December 14th was held in Brussels, the Fintech Summit. Several consultants of Initio were present to assist to various keynotes and new Fintech presentations.
We share with you our opinions and thoughts on the topics covered in this series of articles.
TO BLOCKCHAIN OR NOT TO BLOCKCHAIN?
BY BRUNO COLAGIOVANNI
I participated to the 2017 Fintech Summit Brussels last Thursday and, unsurprisingly, the blockchain was at the center of a lot of heated discussions. But maybe not as you might think…
Of course, there is Bitcoin which is only the first application of the blockchain. Is it a bubble ready to burst? Is the technology scalable? What about the alt-coins? All those questions are interesting but the debate about the underlying blockchain technology is far more important at the moment.
Blockchain is a trust protocol which allows sending value via a network of untrusted participants. This technology is disruptive because it has 3 major advantages over existing systems:
1. Immense security (via immutability of the ledger);
2. Great transaction speed (propagation, verification and clearing); and last but not least
3. Decentralized and open-source implementation.
Surprisingly, large corporations and especially the banking industry have decided to invest early on in the blockchain by fear to be left on the side of the road when the technology reaches maturity (i.e. FOMO (1) attitude). Indeed, the blockchain was revealed by a successful application directly threatening one of their core businesses: a digital currency and a payment system. Also, the blockchain brings trust to transactional systems and therefore removes the need to rely on trusted 3rd parties, reducing risk and cost of transaction.
During the summit, it was clear that banks have been working hard on blockchain but almost exclusively on private blockchains. This kind of blockchain differs from the public version by restricting who is allowed to participate in the network. In other words, they want to play the game but without inviting everybody. By doing so they hope to leverage on the advantages of the blockchain (security and speed) but at the same time they want to remain in control. They go for decentralization but on a centralized network they control. Yet true decentralization is a key aspect of the blockchain. As one of the speakers explained, it looks like “the banking industry has found out about the plane but instead of using it to fly, they removed the wings and use it to drive on roads”. Sure, it’s faster than cars but they are missing the point!
Complete decentralization makes the system bigger, more robust and above all allows innovation on the edge, not innovation at the center. In my opinion, the global blockchain will evolves much more rapidly (think Linux which today runs the majority of web servers and mobile devices on the planet (2). Sure, they will be bumps in the road but at the end it will reach maturity first. The risk banks are taking today is that blockchain users (i.e. their customers) will at some point by-pass their private blockchains making them obsolete. And when they do, I’m sure innovative fintechs will be there waiting to offer alternative open-blockchain-based banking services. So, in fact, the question is not about whether to blockchain or not but how to blockchain.
Private vs. public, centralized vs. decentralized, close vs. open? This is a recurring theme in technology but, this time, stakes might be even higher.
What do YOU think?
(1) Fear Of Missing Out
(2) Android, which is based on the Linux kernel, is the dominant operating system for smartphones with, as of 2016, more than 80% of market share.
About the author.
Bruno Colagiovanni holds a Master Degree in Management Sciences from the Solvay Brussels School and has 5+ years of experience in consulting across various industries, in Belgium and abroad. Bruno is a fast learner who enjoys working in team and, thanks to his strong affinity with technology, he is at ease in both business and technical contexts. Bruno joined Initio in 2015.