Blockchain for Finance is Bollocks

by simbo1905

Blockchain was invented in 2008 and folks have claimed that it might be the most important invention since the internet. I have worked at a number of companies and organizations and seen them throw millions of dollars at ”doing Blockchain”. I am familiar with multiple attempts to use block in banking and insurance. All of the time and money invested were wasted. I am going to call it: Blockchain for Finance is bollocks.

I am sure folks are going to jump up and down and tell me Blockchain has a huge amount of financial services companies actively building, using or deploying Blockchain. Yet the actual useful and viable use cases that are, or will be, commercially successful, particularly in financial services, is negligible when compared to the money wasted. Just because companies are spanking a ton of their investor’s money up the wall doesn’t make it successful. It is unacceptable that serious companies that are not the usual start-up investor honeytraps are still throwing good money after bad to be on the ”me too Blockchain” bandwagon.

If a company could achieve a similar outcome with simpler, cheaper, faster, more environmentally friendly software they should do so. By that measure every financial services deployment of Blockchain has been a bad idea. Blockchain proponents will argue that you can only get a unique outcome using Blockchain hence it isn’t comparable with other traditional approaches. What that proves is that Blockchain proponents don’t understand that the world of finance is entirely underpinned by trust. Trying to eliminate that for it’s own sake isn’t a good idea if it costs you a ton of money and doesn’t increase your revenue. The unique properties of Blockchain that proponents say offsets both the complexity and costs don’t pull their own weight.

An argument can be made that it might reduce some systemic market risk what would justify additional costs without bringing in additional revenue. Yet after a dozen years, and the financial crisis, if there was solid case to be made then it would be ubiquitous and have replaced the old alternatives when it hasn’t. In mid-2020 we are entering a very serious economic downturn. Investment spend in great new ideas will be slowed down for one or two years. Blockchain isn’t going to make a breakout in this downturn even if it was a cost-saving or revenue making idea. An invention that can about before a finance downturn then didn’t take off in a ten-year investment boom, and then gets parked in the next downturn, is simply an idea whos time has passed.

Now that I have called it I would expect Blockchain proponents to launch a number of attacks at me:

* My criteria for being Blockchain in finance being successful are invalid and by their criteria it is successful

* It is too early to call it and success is just around the corner

* Respected financial services Company X has declared they are very excited about their Blockchain deployment

* Bitcoin proves that all financial services companies should be building solutions on Blockchain

* A ”no true scot” argument that the implementations I am aware of were badly done and that if they were done properly they would have been very successful

* Massive blue-chip companies like IBM have built Blockchain for Finance solutions and so clearly it must be a solid IT investment to be ”doing Blockchain”

* ”Argumentum ad hominem”. For example I am simply a negative person about Blockchain in all scenarios so my opinion should be ignored in favour of open-minded people’s opinion

* I don’t understand IT in Finance

* I don’t understand the technology

I could address those here but I will wait until someone steps forward to voice them before I present my case as to why those arguments don’t hold water. If folks do make reasonable comments I will endeavour to respond to them in side of a couple of days.