According to a report produced by a Bank of Canada staffer, most of the advertised advantages of the blockchain technology actually come from more-conventional technologies such as encryption and smart contracts.
The research paper, which the BoC says it solely represents the views of its writer, noted that there is no consensus on “what benefits the blockchain may bring or on how it may fail.” It claims that a careful look into the distributed ledgers, which were inconceivable just a couple of years ago, finds that most of the proposed benefits of blockchain do not really come from “elements unique to blockchain.”
In addition, the author Hanna Halaburda suggested that the excitement surrounding blockchain-enabled applications would benefit more from a distributed database designed differently than the technology that has been at the heart of the surge in cryptocurrencies.
At the time where blockchain inches closer to its entrance across several industries, the analytical paper recommends the technology-referencing startups to temper their expectations regarding the returns they will see on initial applications.
Understanding Blockchain, Away from the Hype
Obviously, the main deficiency of this report is that it presents the blockchain technology merely as a ledger or some database. Despite being true, this is restrictive and does not do it justice, as the technology’s substantive disruption is much more than that.
In other words, the research has not totally figured out all of the details of the inner workings of the blockchain networks. Describing blockchain as a paradigm shift and game-changer could be more meaningful, and it gives a better idea of its true potential.
This recommendation, which Canada’s central bank says it may differ from its own approach, also contrasts to the large-scale adoption of the emerging technology among Canadian institutions.
Canada is seen as a ripe ground for blockchain technology applications, including cryptocurrencies, partially thanks to its tech-savvy population. The subcontinent is also ripe for an institutional-level adoption as the country’s investors may soon get access to the burgeoning market through exchange-listed products that track the price performance of bitcoin.
What’s more, blockchain enthusiasts will argue that the world is basically witnessing the creation of a whole new ecosystem that establishes fresh paradigms for digitalised and decentralised economies. But one of the great challenges of such a transformation is that it is not a one-time game. The widespread emergence of blockchain will take some time because its fundamental concepts are still being tested in various use cases.
In addition, a seemingly endless stream of blockchain companies have been founded in recent months. This can’t go to waste. And most stunningly, governments and central banks around the world are paying attention and have already started countless blockchain initiatives.
Finally, lots of people, including the author of this paper, compare the blockchain hype to the dotcom bubble. But spelling out the parallels between the development of crypto and historic price bubble ignores the fact that blockchain technology is not limited to cryptocurrencies.