When it comes to blockchain technology New Zealand is, well, dragging the chain, according to a report funded by the Law Foundation last year. But perhaps it’s better to be a slow follower because blockchain may not be ‘more transformative than the internet’ after all.
Global consulting group McKinsey & Company has begun the year by pouring cold water on the idea that blockchain is a ‘game-changer’. Given the amount of attention, investment and experimentation the technology has received in the past nine years, an article on the McKinsey site ‘Blockchain’s Occam problem’ argues that it is taking a very long time to deliver results.
“The bottom line is that despite billions of dollars of investment, and nearly as many headlines, evidence for a practical scalable use for blockchain is thin on the ground.”
The title of the article derives from the term ‘Occam’s razor’, a principle in philosophy that states that simpler solutions are more likely to be correct than complex ones.
The authors concede there are use-cases for blockchain. An interesting local example is the company Tatau which, according to a profile in the recent TIN Report, “has developed an enterprise-focused blockchain-based platform that will allow third parties to buy and sell computing capacity via Tatau’s ecosystem.”
Outside of niche applications, the McKinsey article suggests that organisations may be pursuing blockchain pilots for the reputational value of “demonstrating to shareholders and competitors their ability to innovation, but with little or no intention of creating a commercial-scale application.”
There are issues with blockchain canvassed in the article, such as its effectiveness being limited by latency issues (the more devices added, the less responsive the ‘chain’ becomes), and potential security concerns if advances in quantum computing enable the hacking of codes used to authorise transactions.
But the authors’ main beef with blockchain is simply that it is failing to catch on. “Across its many applications, blockchain arguably remains stuck at stage 1 in the lifecycle (with a few exceptions). The vast majority of proofs of concept (POCs) are in pioneering mode (or being wound up) and many projects have failed to get to Series C funding rounds.”