The idea that bitcoin’s underlying distributed ledger technology can somehow be divorced from bitcoin’s digital currency has been the subject of debate for some time, and was again the focus of a new article written by directors at technology consulting firm Accenture.
In a new post for CIO Journal, Accenture managing directors Owen Jeff and Sigrid Seibold offered their thoughts on how institutions can begin leveraging the technology in “corporate environments” and “financial marketplaces”.
Jeff and Sigrid asserted that, due to the high cost of paying for transactions that require anonymous consensus, blockchains need to evolve beyond the need for a native token. The critique is notable in its similarity to arguments popularized by the industry’s more critical thought leaders like Tim Swanson and Robert Sams that center on the cost of distributed mining.
Jeff and Sigrid wrote:
“To be used by financial institutions, including capital markets firms and insurers, blockchains must supplant the costly methods introduced by bitcoin with a mechanism that guarantees security, privacy and speed without paying for anonymous consensus.”
The Accenture representatives suggested one solution could be permissioned distributed blockchains, of which Ripple may be the most notable example.
The piece goes on to ask a number of other questions that all hit upon a growing divide in the industry. Bitcoin proponents have long argued that bitcoin – or some cryptocurrency – is essential to the design of a blockchain, as blockchains require a mechanism to incentivize distributed recordkeeping, a process that on the bitcoin network is facilitated by largely anonymous miners.
Financial institutions, however, seem interested in exploring alternative private networks for such functionality, or solutions that allow for transaction validators to be known.
Accenture has previously made its interest in the technology public, most recently in its appeal for the UK government to more strongly regulate digital currency wallet providers.
Migrating to blockchain
Obstructing the growth of the technology, the writers said, will also be key decisions by people outside the technology ecosystem. This includes overcoming what they called the lack of regulation surrounding the industry and a lack of clarity as to whether smart contracts would be enforceable by law.
Of note given the recent interest by groups like Nasdaq is that the Accenture employees go on to raise the question of how traditional asset classes might be migrated to a blockchain-based network. Jeff and Sigrid, for example, asked how such assets could be given a clear title and when such a blockchain would begin its recordkeeping.
Still, the authors were, on the whole, optimistic about the idea of distributed ledgers, concluding that the technology presents an “enormous opportunity” for the world’s banks and financial institutions should it overcome these challenges.
Ultimately, the writers went so far as to predict a future where those who did not investigate the technology early were ultimately unable to compete, concluding:
“As seats at the table become fewer, only the companies and banks who embraced blockchain’s potential early will remain. Blockchains will bring disruption and displacement, but for the early movers, it will also bring opportunity and growth.”