Representations of virtual currencies Ripple, Bitcoin, Etherum and Litecoin are displayed on a PC motherboard in this illustration, February 13, 2018. REUTERS / Dado Ruvic / Illustration
NEW YORK (Reuters Breakingviews) – After all the clamor, the blockchain is due for a breakthrough in 2019. Banks and companies are progressively applying the technology versions of distributed registers associated with bitcoins to tasks such as regulation. Demonstrating the usefulness of the blockchain, however, will say little about the value of the cryptocurrencies themselves.
The technology's potential for recording and sharing data instantly and securely captures the imagination of the corporate and financial sector and anti-establishment libertarians. The ultimate dream of money that is free from the grip of banks or governments, while the former hopes to replace the aging of back-office technology, increase efficiency and cut costs. Yet, a decade after the basics of the blockchain had been placed by the frantic Satoshi Nakamoto, no killer app emerged.
This is destined to change. Banks and exchanges have deep pockets and their development of authorized blockchain systems – limited to members of a defined group – avoids the heavy use of energy, the capacity constraints and governance problems that have plagued bitcoin platforms and upstart as EOS.
So far these efforts have shown the effectiveness of blockchain for uses such as the settlement of securities or one-off transactions such as the $ 110 million bond that the World Bank issued through a ledger distributed in August. In October, the Depository Trust & Clearing Corp, the largest American securities trading processor, said the tests showed that blockchain technology could handle the daily peak in the US stock market of over 100 million trades.
At the beginning of 2019, Luxembourg banks should start using software from the Cambridge Blockchain startup to manage compliance with the know-your-customer regulations. Digital Asset Holdings, the company that was previously run by former JPMorgan Blythe Masters, is preparing to test its blockchain technology at the Australian Stock Exchange with the goal of replacing its clearing and settlement systems by 2021. Other projects are in the pipeline.
Now that the boom in initial coin bidding, which has raised about $ 20 billion in two years, has largely transformed into a collapse of cryptocurrency values and repression by control bodies, venture capital firms can also channel capital more effectively in less flashy but more useful ideas. The value of Bitcoin has plunged from a peak of nearly $ 20,000 at the end of 2017 to less than $ 4,000 a year later: the original virtual currency and its imitators may never become reliable in a digital way. But the blockchain applications that people can put to good use would be a beneficial by-product.
– This is a Breakingviews forecast for 2019. To see our other predictions, click reut.rs/2R6H5pG
Reuters Breakingviews is the world's leading source of financial analysis for the agenda. As a Reuters brand for financial commentary, we analyze the great economic and economic histories as they roam the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides specialist analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and on www.breakingviews.com. All opinions expressed are those of the authors.