Blockchain Deployments In Financial Services Are At Least Three Years Away

Blockchain Deployments In Financial Services Are At Least Three Years Away
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Lack of interoperability standards will prevent pervasive blockchain deployment across financial services ecosystems for at least three years, according to Gartner. “Blockchain standards for financial services companies are currently fragmented and immature,“ said Fabio Chesini, senior research director at Gartner. “We are three to five years until standards mature and settle.“

Standards are critical for financial services entities because they are constantly moving assets between clients, partners and other institutions. Today, bank CIOs can choose from numerous blockchains, available from either enterprise-grade approaches such as Corda, Hyperledger, and Digital Asset, or the many public blockchain standards like Bitcoin, Ethereum, Cardano, EOS, and Tezos. They are all trying to become the de facto state machine for value exchange and digital asset representation, smart contracts and decentralized applications. This indicates the fragmentation of the various standards.

“Bank CIOs must be mindful of this nascent and fragmented state of blockchain standards,“ said Chesini. “It is unlikely there will be a single de facto standard like in the Open Systems Interconnection (OSI) model, at all levels. Given how new and fragmented the state of blockchain standards is, we expect no more than four standards to lead the market in the next three to five years.“ In addition to standards, Chesini warned financial services CIOs of three additional impediments when deploying blockchain projects: governance, integration and interoperability.

Blockchain governance is important because it regulates activities occurring across the ecosystem and provides legal assurances that there arbitrary decisions will not be made as an abuse of power against other participants. To achieve the true potential of blockchain, implementations must be seamlessly integrated with already installed software solutions. However, major software and SaaS providers aren’t offering blockchain solutions as add-on features to their enterprise solutions. As a result, financial services organizations are paying a high cost for continuously maintaining and “reintegrating“ blockchain implementations into their new and existing enterprise software solutions.

Bitcoin, R3, Ethereum, Hyperledger and others often use differing implementations, data formats, data interchange and directories makinginteroperability among different blockchains difficult across organizations. Fixing these types of data exchange standards will enable numerous blockchains to coexist and to share their ledgers, as necessary. However, as blockchains are a moving target and keep evolving, interoperability solutions are still three to five years away.