by Joseph Young
Market Reports Hub (MRH), a research and data company, recently released a 153-page report on the global blockchain market and its growth rate in terms of finance, investment, and development.
According to MRH, the blockchain technology market is projected to surpass the $2.3 billion mark in terms of market capitalization by 2021, considering the rapid maturation of blockchain startups and service providers that are securing major venture capital funds and capital from established financial institutions.
The paper further noted that emerging economies including China, Australia, and Singapore are leading the global blockchain market by funding both early stage and established startups through innovative acceleration programs and investment platforms. Also, blockchain technology is expected to see the fastest growth in the media and entertainment industry, allowing the sector to solve problems such as copyright issues and distribution of revenue to content creators.
However, MRH also claims that the major factor behind the exponential growth of the blockchain market is the rising interests in the blockchain technology’s transparency, immutability, and scalability, which is a controversial talking point in the world of blockchain.
In the current blockchain market, there exists two forms of blockchain technology: permissioned ledger and decentralized blockchain network. The first form refers to a centralized blockchain network with which administrators like banks are granted control, while the latter describes a fully distributed and trustless network that offers both transparency and immutability.
If the financial aspect of the blockchain industry is dissected, it is quite evident that the market is dominated by banks and major financial institutions attempting to integrate the technology to reduce costs involved in the settlement of transactions and assets.
Banks have spent hundreds of millions of dollars in running various tests and developing prototypes to exploit the blockchain’s potential in the financial industry. Yet, banks and financial institutions fail to present a single working demonstration that is being actively utilized by a prominent establishment. An obvious reason behind this failure is the compromisation of security.
For a blockchain network to operate, it requires immutability, decentralization and a certain level of security which closed servers and databases cannot provide. Bank executives and developers understand that immutability is the key factor in the success of cryptocurrencies. Even Fed governor Lael Brainard emphasized the importance of immutability in an event last week.
Global financial regulations and policies prevent banks from transforming their financial services to become immutable and decentralized because that prevents law enforcement and government agencies from accessing sensitive user data. To stay compliant with global regulations, banks are forced to integrate permissioned ledgers.
This is where the core problem lies. When immutability and security are taken away from a blockchain network and flexibility and functionality are emphasized instead, the network becomes prone to hacking attacks and security breaches. It is also the reason behind the continuous failure of financial institutions’ attempt in blockchain integration despite hundreds of millions of dollars being spent in the development and marketing of blockchain networks.
Thus, a major section of the report which reads: “The blockchain technology market is growing rapidly as the organizations are more focused on transparency & immutability, and scalability. However, factors such as lack of awareness about the blockchain technology and uncertain regulatory status are the major restraints in the overall growth of the market,” is debatable as the progress of the blockchain market in finance continues to be on hold due to the stubborn and outdated approach of banks and financial establishments in attempting to centralize a distributed network.