Blockchain is the future, but there’s still plenty of work to be done before its becomes mainstream
Blockchain, the technology known by most as underpinning the digital currency Bitcoin, was a much-talked about subject in 2016, with its highly secure structure having the potential to positively impact a range of industries.
However, despite the hype, Brian Donegan from the Isle of Man Government Department of Economic Development (DED) believes that there is still a lot of work to be done before the benefits can start to be realised.
“Blockchain will continue to be an experimental technology, it isn’t complete,” he told Silicon. “A lot of people are espousing the value of blockchain, and it’s a great piece of technology, but it is still in part experimental and it’s far from complete.
“People ask me the question, ‘is it true that Blockchain is where we were with the internet in 1994?’ And my response to that is it’s probably closer to 1985, because we’ve got much more work to do with Blockchain in terms of developmental work than most people realise.”
Work to be done
He went as far as to describe Blockchain as currently being in “the trough of disillusionment”, where the initial hype has died down and people have started to realise that there is still real work left to be done.
“A lot of people talk about blockchain but they don’t really know what they’re talking about,” he said. “The simple reality is that the engineering work that needs to be done is significant, it’s getting underway but it’s probably a year or two until we start to see a complete blockchain product evolve.”
The main issue so far from a technology point of view has been one of trust.
“The holy grail of blockchain has been this idea that if you transmit transactions to the blockchain, the participants have to know and trust who’s involved. So the bank has to know you are who you say you are, but that level of trust doesn’t exist on blockchain yet and that’s one of the reasons why it hasn’t been as comprehensively embraced as some people would like,” said Donegan.
The current result of this is that banks and financial institutions are moving away from an open source model to a more “private, permissioned Blockchain” that enables them to make use of the inherent benefits of the technology whilst mitigating the risks.
However, once the desired level of trust and security is in place, Donegan believes it will be “truly transformational” because it will effectively complete the Blockchain technology stack.
Blockchain will be an area of interest for the Isle of Man over the coming months and years as it seeks to continue its efforts in establishing digital business clusters on the island. It has already had success with e-gaming and now has its sights firmly set on fintech and digital payments.
Indeed, steps have already been undertaken to create an infrastructure suitable for fostering the digital payments industry. As well as legislative changes, the island has established “global telecoms interconnectivity, 100 percent broadband penetration, six tier three data centres” and is also self-sufficient for power as everything is generated from natural gas supplies, with the excess sold to the UK national grid.
Donegan was also quick to highlight the development work carried out in the UK, praising the UK government for being “very innovative in the way that it has understood the power and the value of technology and how important it is for the UK to be up to speed with all the latest developments”. And, as we now know, startups and challenger banks have thrived in this environment, innovating rapidly and taking market share away from the established order.
Having realised the value of technology and not wanting to be left behind, this has forced traditional banks to evolve in tandem. Either through growing their own resources internally, or by acquiring exciting startups, traditional banks are having to innovate at a rapid rate in order to gain a piece of the fintech revolution.
“What it’s doing is actually improving the calibre and quality of business for payments in the UK generally and making the UK a very attractive proposition. It speaks to the dynamism that’s in the fintech industry and the UK is just a fantastic place for fintech right now. It’s miles ahead of many of its international counterparts.”
And, according to Donegan, the best is yet to come: “I think we’re going to see some very significant developments over the next two years in fintech, particularly with blockchain and around payments, that’s really where it’s going to have it’s greatest contribution and it’s going to be transformational when it happens.”