Report Highlights Central Bank Experimentation with Distributed Ledger Technology.
The Cambridge Centre for Alternative Finance (CCAF) is out with their first Global Blockchain Benchmarking Study authored by Dr. Garrick Hileman and Michel Rauchs. The publication incorporates non-public data and states that 57% of surveyed central banks are experimenting with the Ethereum codebase. Additionally, the report discusses how both public sector entities and private enterprise are actively pursuing Blockchain development (also called Distributed Ledger Technology (DLT)). The authors captured data from more than 200 central banks, corporations, startups and other public sector institutions.
CCAF is the leading research instituted following disruptive innovations in the finance industry. CCAF publishes annual reports quantifying growth of alternative finance by region. This is the first report the Centre has directed towards the Blockchain industry.
Interest in enterprise blockchain has grown dramatically in recent years. The CCAF report says that at least 115 DLT start-ups now employing more than 2,000 people and many large corporations and many public sector institutions are focusing on DLT development and utilization. While Fintech firms are very active in the DLT space, established corporate firms have become fascinated by the possibilities of incorporating distributed ledger technology.
The report includes a useful glossary of terms along with a Blockchain 101 section to help individuals not directly engaged in the space quickly up to speed. There is also a section designed to debunk common “Blockchain myths.”
Bryan Zhang, co-founder and Interim Director of the CCAF explains;
“Blockchain and distributed ledger technology (DLT) are beginning to rewire our digital infrastructure and challenge our thinking on how data, information, assets, and even governance can be reorganised and reimagined. Substantial amounts of funding have been invested in blockchain firms over a short span of time. The DLT ecosystem is thriving with participation from both private and public sector actors. The potential use cases are ever expanding, from payments to asset ownership, from insurance claims to intellectual property, from applications in Regtech to integration with the Internet of Things (IoT).”
The report aims to chronicle the rapid growth of the enterprise and public sector DLT ecosystem, while also highlighting governance, technical and economic issues that will need attention to unleash the full potential of blockchains and related systems. Key challenges to broad DLT adoption remain as the regulatory environment remains opaque. The study participants consider privacy and confidentiality to be more of an issue than scalability and performance concerns at this time.
Many public sector entities, including central banks, are experimenting with DLT – actively involved in proofs of concepts or running trials. The study findings show that 67% of central banks and 86% of other public sector institutions surveyed are directly experimenting with DLT protocols, with 57% of central banks experimenting with the Ethereum codebase – the public Ethereum network, a permissioned version, or both.
“This is the first major empirical DLT study focussed on enterprise and the public sector. The over 100-page report contains new, non-publicly available data on what is actually happening right now in DLT areas such as targeted use cases, emerging revenue models, timing of deployment, and remaining challenges”, said Dr. Garrick Hileman.
Some of the highlights of the global report include:
- The number of enterprise DLT start-ups has tripled since 2014, from 37 to at least 115.
- About 47% of all enterprise DLT start-ups are based in North America (primarily in the US), followed by Europe (28%) and Asia-Pacific (19%).
- Banking and finance account for 30% of publicly reported DLT use cases, followed by government at 13%, insurance at 12% and healthcare at 8%
- “Immature” technology is still considered one of the key challenges to broader DLT adoption.
- There is significant public sector DLT activity at the local, regional, national and multilateral institution level.
- 58% of public sector institutions (excluding central banks) have planned advanced DLT trials this year compared to only one quarter of central banks; 42% of central banks cannot yet predict when trials might begin. Only limited network and application deployment has been observed to date: the vast majority of users are experimenting with small-scale, isolated networks.
The study was compiled through two online surveys of private and public sector entities between December 2016 and May 2017 through secure web-based questionnaires, supplemented by secondary sources.
The report aspires to make blockchain technology understandable to a wide audience. Contrary to other distributed databases, blockchains and DLT are designed to reduce the need for trust among participants and eliminate the need for a central administrator as entities have shared control over data.
Sections of the report include insight into the DLT Landscape, including how the enterprise DLT ecosystem has evolved and a taxonomy of key ecosystem actors. Use Cases and Business Models exploring investigated applications and revenue models are addressed as well as challenges and Interoperability examining obstacles to adoption.
Hamish Thomas, Partner, Financial Services Advisory, EY explained that DLT promises to increase speed, efficiency, transparency and trust across all sorts of transactions;
“While the future looks exciting, there is still work to be done in areas such as legal and regulatory frameworks, industry standards, governance and security,” said Thomas. “This global benchmarking study will be a rich source of information, helping leaders across all sectors better understand current areas of focus, attitudes towards the technology and the types of questions that still need to be addressed.”
The CCAF report, published with the assistance of Visa and EY, is a perfect primer on Blockchain utilization for individuals interested in the disruptive technology. But the document also provides unparalleled global perspective for Blockchain experts curious about sector growth and direction.