Nearly one in six people worldwide don’t have the physical documentation they need to access healthcare, housing or to vote. But what if our identities were completely digitized and secure? It’d be just one of the many ways that blockchain could enter our daily lives.
The hype for blockchain has simmered compared to past euphoria – but there’s still a lot to look forward to. In our recent podcast, “What’s next for blockchain?”, moderator Mary-Catherine Lader spoke to Robbie Mitchnick, BlackRock’s blockchain lead, on the evolution of blockchain and cryptoassets and discusses what’s next.
Lader: You spearhead our blockchain initiatives at BlackRock. Let’s start with a level set: What is blockchain in one sentence?
Mitchnick: Blockchain at its core is a special type of database. Instead of relying on a central, trusted intermediary to authenticate transactions and keep records, you rely on cryptography, i.e., math. And what that enables is a single golden copy of record that can be shared across a network and is perpetually reconciled and, from a practical standpoint, is impossible to tamper with.
Lader: We haven’t actually seen a lot of blockchain adoption at scale among financial institutions. Why do you think that is?
Mitchnick: It’s not so much a story of people overestimating the usefulness of the technology as it is a story of people underestimating the difficulty to implement it. There are a number of reasons for that. One, decentralized governance is a new paradigm that doesn’t have a lot of precedence. There isn’t a single entity that controls how a network should run or owns the data or the technology behind the network. Secondly, the need to simultaneously line up many ecosystem participants – each with different processes and standards – and get them to adopt a new network at once is very difficult. Lastly, blockchain is still not that well-understood by a lot of large institutions, and the scale of disruption is broad. In many cases, you would need to take multiple, disparate legacy systems and replace them with a single blockchain-based model. That is going to take time.
Lader: What are some of the ways that blockchain could influence people’s daily lives?
Mitchnick: I think this is one of the areas where the hype for blockchain got most overblown. In the peak of the euphoria, some people claimed that blockchain was going to one day do your laundry and wash your dishes, and that was just never the case. There are many good use cases and there are many not-good use cases that have been proposed. One of my favorites is in payments. Retail remittances, or when people send money abroad, is a $700 billion notional volume market. To send $200 on average costs 700 basis points, or 7%, today, which is an absolutely massive tax; and not only that, it’s also slow and has high failure rates. Similarly, the corporate cross-border payment market is $20 trillion notionally. Fees are not as high there, but they’re still high, and settlement is not as slow, but it’s still slow. There is a massive opportunity for blockchain to enable real-time payments at a near-zero cost.
Lader: There was a lot of enthusiasm about cryptoassets in 2008 with the birth of Bitcoin, if you will, and again in 2015 and 2016. But now people roll their eyes, and it feels like blockchain is a tired buzzword. Where do you think we are in the hype cycle, and where do you think we are going?
Mitchnick: Even though blockchain and crypto are fundamentally distinct concepts that may ultimately have different endings, the blockchain hype cycle has very much tracked Bitcoin’s cycles. We’ve had three of those in its ten-year history. The first was from inception through 2011, the second peaked in late-2013 and troughed in 2015, and the third peaked in December of 2017. In the last year and a half, this trough of disillusionment has set in. People have started to tire of the buzz and have started to question it. But as is typical in that classic Gartner hype cycle, the fundamentals – speed, privacy, security and scalability – are actually improving. That doesn’t mean we’re going to see widespread adoption, and a lot still needs to happen. But we’re certainly starting to see meaningful progress.
Lader: So a lot to come in 2020 and beyond. Thank you, Robbie.
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