Blockchain has become somewhat of a buzzword in the financial sector. Many people have high expectations for this revolutionary technology. However, some critics claim the financial sector needs decentralization, rather than more proprietary solutions. There are some reasons as to why this latter approach may be preferable.
Is Blockchain Over-hyped?
According to a recent piece on InvestorPlace, the blockchain bubble is very real. There are still a few worthwhile projects in development which can offer a broad range of applications. However, the number of blockchain “stocks” has increased exponentially. A change that was to be expected ever since everyone started using the word to describe their company.
As such, the blockchain hype has become over-saturated. Very few actual use cases require blockchain technology. Instead, most of them require the principles presented by this technology. Mainly decentralization is a welcome change of pace in any industry. Blockchain itself may not necessarily be a big part of the future of society. Decentralization and cutting out the intermediaries, on the other hand, offers a lot more exciting use cases.
With the blockchain stocks plummeting rather quickly the next phase is almost upon us. During this transition, more and more companies are likely to steer away from proprietary blockchain technology. One exception is the banks, as they continue to file and win patents regarding distributed ledgers. Bank of America recently secured another such patent for a proprietary blockchain-based venture.
The Era of Financial Decentralization
If there is one thing Bitcoin has shown the world, it is how decentralized finance can work. Although converting to and from fiat currencies still mainly requires centralized platforms, that too is coming to change. Slowly but surely, decentralized exchanges are slowly gaining traction. This will affect the cryptocurrency industry but also spill over to the rest of finance.
With decentralized solutions, a lot of the current issues will be resolved. High fees will become a thing of the past. Foreign exchange rates can be all but eliminated in the process. More importantly, there is no need to ask permission from a bank or clearinghouse to move one’s own money around. All of this sounds link some kind of banking utopia, but it is not unfeasible by any means.
Since blockchain is built on the concept of decentralization, it is evident this change will come sooner rather than later. Blockchain is just a medium to convey these principles to the masses. It is not the only way of achieving this goal either. The future is looking bright, but it may not necessarily include blockchain technology in any capacity. So far, that doesn’t seem to be a bad thing. That is, unless one heavily invested in blockchain stocks during the recent bubble.