LONDON (Reuters) – Investment firms and banks have begun to plunge into blockchain pilot projects over the past two years, but the application of the new technology to most trades has probably been oversized, according to a report by the Boston Consulting Group (BCG).
Blockchain, originally the platform behind the bitcoin cryptocurrency, is seen by some as a solution to inefficiencies, improving transparency and reducing the risk of fraud. But BCG believes its potential has been exaggerated.
A high-tech ledger, blockchain uses a shared database that updates in real time and can process and adjust transactions in minutes without the need for third-party verification.
The volume of trade through various schemes has so far been negligible and it is too early to say how quickly it could reach a critical mass.
"There are many pilot schemes, but no one has yet become a real production system.One of the problems is that it is not designed for physical operations.The fundamental problem: how to track a physical entity in a world virtual? They are two colliding worlds, "said Antti Belt, co-author of the BCG report.
One of the obstacles to improving technology is the reconciliation of terminologies and the fact that the transition to a blockchain platform is even justifiable from a financial point of view.
"The industry is very old and everyone is using a different language." "How do you define quality, shipping programs … a lot of reconciliation is needed on both sides today," Belt said.
"People have spent millions, sometimes over $ 100 million, on the IT system, they want to do it again?"
In addition, it is not sure to what extent economic operators will want to adopt a technology that will already erode the razor – in profit margins.
BCG said that while platforms are taking shape, it would be "bad news" for merchants merchants because price inefficiencies and unequal distribution of information they rely on to make profits disappear.
"The use of blockchain solutions would significantly improve transparency … It would also create a more efficient and liquid market by shifting commodity trading away from bilateral agreements directly between two parties for platform-based transactions to meet buyers and sellers, "says the report.
Co-author Steven Kok said the interest in the broader adoption of blockchain technology would begin where the main driver is certifying the source of the asset, as with diamonds rather than with the 39; efficiency.
De Beers of Anglo American in May had tracked 100 high-value diamonds from the miner to the retailer using blockchain, in the first effort of its kind to eliminate the supply chain of impostors and exploitation.
However, major companies and banks have tested the blockchain on commodities such as energy, diamonds, food and oil. Last year a consortium comprising major banks, commercial companies and producers BP, Equinor and Royal Dutch Shell announced that they would develop a blockchain-based platform ready by the end of 2018.
Separately, trafigura trader created another platform with IBM and Natixis for the US crude oil market last year. The main traders of agricultural products have also tried the blockchain like Louis Dreyfus Co with a load of soybeans.
"Simply put, blockchain may not be the right answer for all players," the report concluded.
Reporting by Julia Payne; Editing by Mark Potter