Blockchain to be “widely adopted by 2018“

September 6, 2016

 

 

Blockchain, like big data and even cloud before it is often a term often accompanied by much hyperbole. The BBC even referred to its current status  as that of the internet itself in the 80s – in other words, those who understand it well enough, truly see its potential.

 

Few people are as knowledgeble as Jens Bartenschlager, The Advisory House, on the matter – at least, within the context of energy trading.

 

Ahead of his participation at #ETOT this October, we had the chance to ask him some questions on the matter – we think you’d agree that some of the insight below is simply priceless!

 

Blockchain technology is one of the hot topics of this year’s ETOT. Why do you think that is?

 

ETOT participants have recognised that the deal lifecycle can be handled by decentralized Blockchain applications. This can increase effectiveness and efficiency. A selective partial process redesign can be a tangible first step towards peer-to-peer transactions. This can lead to a decrease in transaction cost and an increase of automisation and data quality as an opportunity for operations and IT. In a growing energy trading spot market with dropping prices and transaction volumes, this becomes increasingly interesting for the involved market players.

 

Everybody has heard of bitcoin, which started the Blockchain movement. Bitcoin is widely accepted as a cryptocurrency and is becoming more and more present in daily news. The original concept has been proven to work for around 7 years already. During this time, a number of lessons have been learnt - mainly to improve its original design as a cryptocurrency network that conducts validated transactions of monetary value.

 

More recently, the Bitcoin movement has started to also focus on use cases for non-financial applications. These are decentralized in nature and offer trust based exchange of values. Other approaches have also developed. Ethereum, for example, is a promising alternative to Bitcoin. It is meant to serve as a software development platform for decentralised applications executed on its Blockchain via Smart Contracts. 


“[Blockchain] can lead to a decrease in transaction cost and an increase of automisation and data quality as an opportunity for operations and IT. In a growing energy trading spot market with dropping prices and transaction volumes, this becomes increasingly interesting for the involved market players.”
 

All Blockchain related approaches add a multitude of new opportunities. The Blockchain can be utilised to reinvent existing processes or realise entirely new business models. 

 

This technology is developing a lot in the banking sector. When do you see it generalised to all other industries?

 

With its origin in the cryptocurrency bitcoin, it seems obvious that Blockchain has originally started especially in the banking sector. We can observe in general that many concepts have been proven to work in this industry. Some of these are already adding value in a growing community - both in the banking as well as in other sectors. 

 

Many Blockchain protocol projects are evolving to address existing technological insufficiencies or to bring to life new concepts. Think of Ethereum, Colored Coins, NXT, or Ripple. Their application goes far beyond the cryptocurrency aspect into many different directions and industries. It seems that nothing is impossible anymore.

 

Investors are particularly keen on supporting these projects across different industries. Just to name a few examples: LaZooz as an equivalent to Uber offers ridesharing. Twister allows for social networking and peer-to-peer microblogging similar to Facebook. And Storj offers file storage like Dropbox.

 

Speed in development and diversity of new projects is increasingly growing. We can expect that the next 7 years will bring about much more innovation and change across industries than the last 7 years have.

 


“Deutsche Bank, UBS, Santander und BNY Mellon have just announced a Blockchain product cooperation to be market ready by 2018. [where it will not be] the enabling technology anymore. It will have matured enough to promote itself in widely accepted, evolutional steps rather than in a disruptive, revolutionary [one].”
 

Blockchains involve a variety of core infrastructure components such as cloud services and cryptography. The earlier agreements are achieved on common standards for these, the better. As only then will it become possible to focus on creating value-adding services with fast time to market. This can and probably will significantly accelerate the general Blockchain evolution and distribution.

 

Reliable, ready-to-run products across industries will have a positive business case within the next few years. Deutsche Bank, UBS, Santander und BNY Mellon for example have just announced a Blockchain product cooperation to be market ready by 2018. By this time, we will not even notice that Blockchain is the enabling technology anymore. It will have matured enough to promote itself in widely accepted, evolutional steps rather than in a disruptive, revolutionary manner.

 

What could be the potential obstacle to this technology developing further?

 

A number of obstacles can be observed. This certainly includes the comparably low throughput of transactions per second and the high latency to confirm transactions. Blockchains show an increasing hunger for storage space. Security issues will need to be monitored very closely for acceptance across industries. Resources run the danger of being wasted with extensive code executions. The complexity of Blockchain solutions can also lead to a low usability.

 

Some of these obstacles are already being addressed by newer approaches, while others still persist. Ethereum, for instance, improves throughput and latency.  And NXT provides improved features for cryptocurrencies.  However, there is no efficient solution for handling the Blockchain infrastructure complexity – at least not yet. As we can expect most technical challenges to be solved sooner or later, it could also be the case that a competing technology outperforms Blockchains in establishing a platform for decentralization. Maidsafe, for example, claims to do so by combining its decentralized platform with a cryptocurrency already.

 


“…a key success factor will be which technological platform will be widely accepted and utilized. As history shows, this does not always have to be the best concept or technology but the one with the dominating position in the market.”
 

Overcoming the obstacles will be crucial for lasting success of the Blockchain development. The most important one is certainly around security and crime scandals of illegal trading or ongoing theft of bitcoins and their impact on public perception. Privacy challenges can arise from all sorts of personal records potentially stored across Blockchains, especially if these have been secured only by a single secret key.  Additionally, government regulation – usually driven by centralized interests such as taxes – could have a detrimental impact on promising new value propositions. Last but not least a key success factor will be which technological platform will be widely accepted and utilized. As history shows, this does not always have to be the best concept or technology but the one with the dominating position in the market. 

 

Still, despite all thinkable obstacles it is clear that the Blockchain representing decentralization trends is a revolutionary new paradigm. It is a decentralized trust network, a consensus model at scale, a disruptive force that will have a substantial impact.

 

This will be the first time The Advisory House is taking part in ETOT. What do you think the platform will bring to participants? What do you expect from your participation?

 

ETOT is often referred to as the “must attend” operations and technology event for the energy trading industry. Participants can liaise with peers from other organisations. In a more neutral setting away from daily operational pressures. To focus on what really matters in the long run to keep their organisations successful. We are really looking forward to discussing hot topics and tailor made solutions – including and beyond Blockchain – with the key players in the industry.

 

 

What do you think?

 

Is it really a technology which will be common place before 2020? Do you have any experience of leveraging it for your business?

 

Let us know!

 

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