That may sound dire, but poll anyone in the financial services industry and they will likely tell you that the technology is still in need of its break-out moment. If significant headway isn't made – or real value delivered, whether in cost savings or new revenue generation – by the end of 2017, I suspect the technology will risk developing fatigue in executive suites.
A key part of the issue is that while progress has been made, the technology has not yet reached widespread adoption – the market is crowded with proofs-of-concept (PoCs), but not enough live implementations.
And while some successes have been achieved, nothing with significant volume, staying power or appropriate scalability has emerged. As a result, the small size of existing applications means that the cost of running blockchain platforms might still be greater than the value derived from them.
Urgency and progress, rather than more of the same, will be essential to move forward.
Yet, it's not all doom and gloom. 2017 will potentially be a banner year for blockchain. In fact, we at Deloitte are quite bullish on our outlook.
Why? Financial institutions have the power and ability to move blockchain to the next level. To get there, companies will likely need to do two key things.
First, they will need to move away from churning out proofs-of-concept, shifting instead toward full-blown solutions.
Second, it will be critical for them to come together and further form industry consortiums to unlock mass-scale value. For blockchain to remain relevant, the entire industry should come together.
And, with more than 20 consortia in place already, we are on our way to success.
In addition, in a recent Deloitte survey of blockchain-knowledgeable executives, just 12% of financial services executives said their company has deployed blockchain in production. But they are aiming to pick up the pace: 24% say their companies plan to go live with blockchain in the coming year.
Saying goodbye to PoCs
So, how do we ensure a successful future for blockchain? There are two main factors that can help propel blockchain forward in 2017.
First, the industry needs to show that real-world implementation. That can help avoid this proof-of-concept stagnation, while also getting firms excited about blockchain and its actual uses. This is easier said than done and it requires to think differently about blockchain. The proof-of-concept is not the endgame anymore!
The second critical success factor is for firms to come together to form smaller blockchain consortia specific to relevant use cases. These smaller consortia are critical for one simple reason: if you are on your own in blockchain, the value is extremely limited.
They should include a small subset of key players at first, what we call the "minimal viable ecosystem". These players should represent all key functions and be represented by financial institutions, technology companies, regulators and consultancies to make them real.
Looking to the future
In addition to moving on from PoCs to real-world implementations and fostering industry partnerships, there are a few additional hurdles for blockchain in 2017.
Performance and scalability: As an industry, we need blockchains with better performance and scale. We also need an independent way to compare performance across blockchains – a benchmark of some sort.
Regulatory and legal framework: As is often discussed, the regulatory and legal actors need to embrace blockchain technology. And they have done that in a big way in financial services, at least in theprogress is clearly needed, however, so other industries regulators such as healthcare, telecommunications or supply chain must follow suit.
Security: While the technology was originally designed to address specific security concerns such as integrity and availability, other security aspects need to be improved. Privacy and confidentiality, especially among the blockchain participants, is still a really important aspect to understand and improveeducation is also required on data quality. Blockchains are by default to protect against modifications of data and transactions, not to improve the quality of this data. The “garbage in, garbage out” mentality still applies in blockchain world.
Education: More education is still needed to explain blockchain to industries outside of financial services and to highlight the value that blockchain can bring to ancan help organizations realize the importance of forming smaller blockchain consortiums to tackle larger problems and avoid PoC fatigue. More importantly, we must continue to explain why and when blockchain is not applicable, in order to bring credibility.