Journal : Global Times (English) Date : Author : Tom Buerkle, a Reuters Breakingviews columnist. Page No. : NA
URL : http://www.globaltimes.cn/content/1134350.shtml

After all the hype, blockchain is due for its breakthrough in 2019. Banks and companies are gradually applying versions of the distributed-ledger technology, the platform associated with bitcoin, to tasks like settlement. Demonstrating blockchain’s utility, though, will say little about the value of cryptocurrencies themselves, as those currencies in fact only use blockchain as a platform.

The technology’s potential for recording and sharing data instantly and securely has captured the imagination of the corporate and financial sector as well as anti-establishment libertarians. The latter dream of money that’s free from the grasp of banks or governments, while the former hope to replace aging back-office technology, increase efficiency and cut costs. Yet a decade after blockchain’s basics were laid down by the elusive Satoshi Nakamoto, no killer application of the technology has emerged.

That’s set to change. Banks and exchanges have deep pockets, and their development of permissioned blockchain systems – limited to members of a defined group – avoid the heavy energy use, capacity constraints and governance problems that have plagued bitcoin and upstart platforms like EOS.

So far the efforts have proved the effectiveness of blockchain for uses like securities settlement or one-off transactions like the 110 million Australian dollar ($77.21 million) bond the World Bank issued through a distributed ledger in August. In October, the Depository Trust & Clearing Corp, the biggest US processor of securities trades, said testing showed blockchain technology could handle the US equity market’s peak daily volume of over 100 million trades.

In early 2019, Luxembourg banks are expected to start using software from startup Cambridge Blockchain to manage know-your-customer and regulatory compliance. Digital Asset Holdings, the venture until recently run by former JPMorgan derivatives boss Blythe Masters, is getting ready to test its blockchain technology at the Australian Stock Exchange with the aim of replacing its clearing and settlement systems by 2021. More such projects are in the pipeline.

Now that the boom in initial coin offerings, which raised some $20 billion in two years, has largely turned to bust amid plunging cryptocurrency values and a crackdown by watchdogs, venture-capital firms may also channel capital more effectively into less flashy but more useful ideas. Bitcoin’s worth has plunged from a peak of nearly $20,000 in late 2017 to under $4,000 a year later: The original virtual currency and its imitators may never reliably become digital gold. But blockchain applications that people can put to good use would be a beneficial byproduct.

The article was first published on Reuters Breakingviews. 

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