One highly practical reason for using a
blockchain-type solution was voiced by IBM's Jerry Cuomo during a
Consensus 2016 panel about how companies are embracing the technology.
Cuomo, who is IBM's VP of blockchains, said
there have been times when he has analysed a client's needs and after
pause for thought, returned with the verdict that a blockchain may not
be the best solution to their problem.
He said: "When this happens the client replies: 'But Jerry, if I call this project a blockchain, we'll get funding for it."'
Similar sentiment was aired about an hour
later by Scott Manuel of Reuters at William Mougayar's panel on internal
uses of blockchains. Manuel was talking about finding blockchain
engineers – something of a premium skill set these days. He said if you
included the word "blockchain" on your resume it earns you 2x premium. "It's a good idea to add it to your LinkedIn – quickly!"
This is all fine and well; it's a burgeoning
space and where capital is naturally flowing. But a warning was issued
by Blockstream's Austin Hill who pointed to a precedent of dangers the
industry potentially faces.
"If we look at the beginning of any major
enterprise software hype cycle, ERP, CRM, there was this huge
expectation and the gap between the promise of the technology and
people's understanding or ability to deploy it and promise was quite
high.
"Some of you may remember there was a period
where if a CIO announced a major ERP project back in the late 80s, you
could measure the half-life of the CIO by about 20-22 months; they would
be leaving the company and they would announce a re-implementation of
the ERP project.
"Because the of expectation and the gap it
wasn't there. A lot people – we certainly see it – come in and say they
want a blockchain. They don't know why they want it. They don't know
exactly what it does.
"There is a real danger if you look at
blockchains as just an IT modernisation project that in a couple of
years it really could have some blow back, both on the industry and
affect people's experience of the value they create. We
tend to look for use cases that don't just use a small part of the
blockchain; if you are looking for an audit trail, there are other ways
to do an audit trail, especially in a single enterprise."
Elsewhere, post-trade infrastructure
incumbents and startups meditated on the possibility that distributed
ledgers might prevent the next Lehman's collapse. This proposition,
moderated by Consult Hyperion's Salome Parulava, seems sane enough. It
was a couple of days after Lehman that banks froze and were unable to
lend or bank with each other because nobody knew who owned what any
more.
Greg Schvey, CEO of Axoni, which has built a
blockchain-like system for ICAP and its partners, said that as far as
fabled golden records are concerned, there are workable trade
information warehouses, but this means a scattering of data and a need
for continual reconciliation.
Taking the side of incumbents, Jennifer Peve
of the DTCC said the best way to retain a semblance of governance would
be through a careful and gradual process of integration, "plugging into
infrastructure".
Schvey said things varied depending on
which architecture one selected, "whether or not to have a logic layer
baked in". He mentioned Bitcoin in the capacity and also the messaging
system used by Ethereum and said Axoni had seen better results with the
latter.
Parulava lamented that Clearmatics CEO Robert
Sams, who was billed on the panel, had not made it to the event. This is
definitely true, because Sams offers less quarter to automated
intermediation than anyone on that panel and most people looking at this
space.
In fact he suggests a
"centralisation paradox" can befall blockchain design, depending on
where the distributed ledger is located in the post-trade lifecycle.
If the distributed ledger technology (DLT)
comes only at the end of the post-trade life cycle, then some other
technology or technologies are automating the post trade processes up
until that point. Then the DLT could end up turning a distributed,
industry-wide golden record into an intermediary technology service,
even if the DLT is itself a technology commons and open source.
This could have the rather paradoxical
consequence of actually concentrating rather than decentralising
post-trade intermediation. It's a process
that needs to be automated and if the automation of that process isn't
based on a model of distributed automation, but some other type of
technology, it doesn't matter that the distributed ledger is
distributed, Sams points out.
It's interesting to see the industry wrestle
with the concept of shared ledger technology and how much intermediation
and centralisation might accompany that. But it would be remiss to say
this sort of difficulty only befalls the herd of banking and finance
blockchain builders and marketers out there.
At a panel session on reaching consensus on
open blockchains, Ethereum's Vitalik Buterin pointed out the same sort
of internal centralisation risks blight Bitcoin, "because if the spec is
an implementation then the developers of that implementation become the
new point of centralisation."
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