Blockchain-rewiring

By Stephen Marshall, Financial Services Technology lead, Deloitte

Blockchain’s ability to replace middlemen with mathematics is precisely why this technology matters. It can reduce overhead costs when parties trade assets directly with each other, or quickly prove ownership or authorship of information – a task that is currently next to impossible without either a central authority or impartial mediator.

Moreover, blockchain’s ability to guarantee authenticity across institutional boundaries will likely help parties think about the authenticity of records, content, and transactions in new ways. Consider, for example, the efficiencies that shared ledger technology might bring to the labyrinthine global payments market. Or how a secure, transparent, transactional environment might help developing countries reduce the estimated $1.26 trillion they lose each year to corruption, bribery, theft, and tax evasion.

The financial services industry (FSI) plays an important role as today’s institutional authority of record for payments and remittances, the issuing and trading of securities and trading, and ownership of financial instruments. It comes as no surprise, then, that FSI organisations are aggressively pursuing blockchain investment and experimentation. Outside of the financial sector, organisations across industries are also ramping up their own blockchain programmes and exploring opportunities, with next-generation payments, loyalty and rewards platforms, smart contracts, asset management, and exchange scenarios leading the charge.

Meanwhile, venture capitalists have invested roughly $1 billion in 120 blockchain-related start-ups – half of that investment taking place within the last calendar year. Investors recognise that the blockchain ecosystem lends itself to different use cases and technology enablers, from payment processors and digital wallets to cryptocurrency exchanges and blockchain-based platforms. Analysts at one investment bank commented on this trend recently, saying, “We expect venture capital flows to accelerate in 2016 and lead to further development of the foundational and infrastructure services necessary to create a fertile ‘plug and play’ ecosystem for entrepreneurs and innovation that may ultimately escalate enterprise adoption from a trickle in 2016 to a multi-year boom starting in 2017.”

Blockchain consortiums are forming as well. For example, R3 CEV, representing more than 42 of the world’s largest banks, is creating a distributed ledger platform to power FSI’s foray into blockchain.5 The Digital Currency Group, sponsored by MasterCard, New York Life, and others, manages and operates a portfolio of blockchain and cryptocurrency investments.6 Enabling technology players are also getting involved. The Open Ledger Project, backed by IBM, Cisco, Intel, the Linux Foundation, and others, has created a standards-based, open-sourced blockchain platform to accelerate adoption and the development of surrounding services.

This post is an extract from Tech Trends 2016: Innovating in the digital era. Find out more about Blockchain in Blockchain: Enigma. Paradox. Opportunity or by contacting Stephen Marshall from the Deloitte Blockchain Lab.

Stephen Marshall

Stephen Marshall - Partner, Retail Banking

Stephen leads the Deloitte Financial Services Technology team. He has over 20 years experience in advisory and delivery programmes, and has worked on a broad spectrum of challenges with his many clients - from IT sourcing and cost reduction, organisation design and IT strategy, through to the delivery of large, complex business transformation programmes.

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