Credit Suisse has identified what it sees as 8 "key challenges" for the mainstream adoption of blockchain, the innovative database technology first developed to underpin digital currency Bitcoin. Banks and financial institutions have been going crazy for blockchain technology over the last year and a half. Institutions are spending thousands on proof of concepts using the technology, issuing countless white papers, and joining industry-wide bodies to figure out how to use the protocol. Blockchain, also known as distributed ledger technology, is a kind of decentralised database system. Instead of one central database of who owns what in a settlement house somewhere and duplicate records in banks based on this master ledger, blockchain is a network of identical databases that talk to each other and are updated simultaneously. Every time someone wants to make a change or add something onto the blockchain, the majority of members of the network must sign off on it. This cuts out the need for middle men in transactions, because the fact that everyone signs off means trust is built into the system. Bitcoin's original blockchain is used to record bitcoin transactions — but the tech could theoretically be used to record just about anything. In essence, blockchain helps cut out a lot of admin, and has the possibility to reduce costs and increase simplicity in finance. Goldman Sachs went as far to say that blockchain has the potential to "change, well, everything." But in a note on the technology sent to clients this week, Credit Suisse analysts Charles Brennan and William Lunn says they are "less sanguine" about the technology, and identify 8 key barriers to blockchain's successful transition from interesting, leftfield technology to mainstream, financial services core technology. Despite all the above, Credit Suisse says they see blockchain as potentially "disruptive" technology that should be embraced. Just don't get too caught up in the hype.
Blockchain has eight barriers to overcome in order to become a core, mainstream financial services technology, according to Credit Suisse. Blockchain, because it's a network, only makes sense with a certain critical mass. The first barrier is the scalability of blockchain. This security feature may not be in place on blockchains with lower numbers of participants. Despite these challenges, the blockchain is a potentially disruptive technology that ought to be embraced.