Is 2017 the Blockchain’s Year?

Illustration with word cloud with the word Blockchain.

The blockchain might be one of the more dynamic areas in technology in 2017 – major players seem to be positioning themselves for a leap forward and they appear to be building momentum for blockchain as a focus for technology investment and development in the year ahead.

“Blockchain technology continues to redefine not only how the exchange sector operates, but the global financial economy as a whole.” –  Bob Greifeld, Chief Executive of NASDAQ

An increasing number of industries are realizing the need for urgency in being ahead of the curve, and are exploring ways of using blockchain technology.  As a result, there is an expansion of investment in developing blockchain technology.

The US Patent and Trademark Office recently published that four applications were filed by MasterCard related to its work with blockchain and distributed ledger technology.  The applications focus on methods and systems for authorizing, processing and securing blockchain-based transactions.

Here are a few things that might make a big impact on blockchain technology for 2017:

 

1. Deployments will come online

Despite misconceptions that blockchain is years away, we might see full deployments in financial services, insurance and healthcare industries this year.

This could completely disrupt payment systems on an international scale – revenue models and other processes could become obsolete, as payments become faster, cheaper and safer.  However, if the blockchain becomes mainstream, it cannot ignore a major hurdle standing in the way, a clear path to adoption for blockchain and a global standardization.

 

2. Progress on standardization will be made

If blockchain technology becomes more widely adopted, a standardized method for interaction is critical. There are complicated and political processes preventing this – industry organizations have competing interests and businesses enjoy having a perceived advantage.  As blockchain implementations begin, there could be a paradigm shift toward standardization and consolidation as organizations which were once in competition realize the benefits of a unified approach, including accelerated trade processes, enhanced fraud detection and better data management.

There may be only a couple of viable blockchain consortiums left standing in 2017, industry players will have to cooperate and collectively agree on open standards that are flexible and versatile. Governments and regulators also have a key role to play, to protect consumers while fostering innovation.  Korea’s five largest banks – KEB Hana, Shinhan, Kookmin, Woori, IBK – joined the R3 consortium, while three Korean institutions – Coinplug, Samsung SDS, and Korea Securities Depository – became members of the Hyperledger project.

The stakeholders pushing the evolution of these standards will need to be imaginative, and envision a future where innovators leverage the standards they made to create new and powerful tools.

 

3. FinTech is accelerating

FinTech is causing massive change, everything from a single payment to how global finance operates is being disrupted.

  • South Korean Financial Regulator Releases FinTech Roadmap.
    • South Korea’s Financial Services Committee (FSC) announced its two-step FinTech Development Roadmap in October 2016.  The roadmap comprises two steps:
      • Eliminating irrational regulation.
      • Improving FinTech industry systems.
    • Notably, the roadmap includes the creation of the Bank Joint Blockchain Consortium and the institutionalization of digital currencies such as bitcoin, as well as establishing a finance test bed for new FinTech services.  With its roadmap, the government is trying to remove hurdles that may obstruct the adoption in South Korea, as well as nurture an environment for FinTech companies to develop their business more freely.
  • Blockchain and machine learning could combine to accelerate existing processes and optimize efficiencies.
  • Lending networks could become one of the hottest areas of blockchain.
  • More nations around the world becoming interested in development.

 

4. Payments are ready for disruption

Within the field of payment transactions, the technology could be used to overcome current problems of the banking system and international money transfers.

The fee-intensive and fragmented processes of cross-border, non-cash transactions could be eliminated by the exclusion of third parties, direct money transfers and efficient interbank settlements. The possibility to create a competitive marketplace of liquidity providers potentially ensures the best exchange rates for international exchange and payment transactions.  Payment systems are based on local laws and practices within existing domestic banking, and the lack of a common standard reduces the ability to seamlessly pass data and back-office information, creating both settlement and non-settlement risks.

A broad implementation and use of the blockchain technology would change and disrupt the financial services industry and payment systems on an international scale.

 

 

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