Recently, Bitcoin.com reported on the 2016 Gartner Hype Cycle, which placed blockchain technology at the “Peak of Inflated Expectations.” Now, a senior official from Gartner suggested that distributed ledger technology is “over-hyped.”
Gartner Executive Peter Sondergaard Says ‘Blockchain Technology Is ‘Over-Hyped Right Now’
Gartner’s senior VP for technology Peter Sondergaard recently chatted with news outlet Fin24 about blockchain technology. The executive gave his opinion concerning the financial tech industry’s current focus on distributed ledgers the underlying technology behind Bitcoin.
A lot of legacy finance institutions and banks have been researching and developing blockchains to enhance their business operations. These companies believe blockchain technology can increase settlement times, verify payments, and completely transform global trading markets. However, even though there is strong interest coming from many entities, Gartner associates believe the market hype is a bit over exuberant.
In a media briefing the senior executive from Gartner, Sondergaard told Fin24:
I think it’s a fascinating area to keep an eye out for but I think it’s being over-hyped right now.— I think it’s being over-hyped from the aspect of its short-term impact because there are still technical things that you need to solve and scale and there are still counter-aspects – business model wise – that aren’t necessarily fully clear.
EY Believes In Blockchain, But It Will Take a ‘Few More Years’ to Succeed
In line with many banks delving into this technology, large consultancy firms like EY and Accenture have told clients to get on board the blockchain train.
According to a recent report by Ernst and Young (EY) called “Capital Markets Innovation and the Fintech Landscape,” financial technology will grow exponentially. In the report, the multinational firm explains that nine technology trends will be on the forefront of this change. This includes smart contracts, blockchains, the Internet of Things, and Artificial Intelligence (AI). Some of these innovations, EY explains, may take a few years to catch on:
While more maturing technologies such as AI, smart contracts and Blockchain have clear potential to be game changers further down the line; they will take a few more years to come fully to fruition.
EY’s report also shows some interrelation between these nine technologies. For instance, blockchain technology can converge or overlap with smart contracts and robotic automation. Software can do an assortment of activities that could save individuals and institutions millions in costs. Operations like client onboarding, post-trade settlement, analytics, and risk management are some of the many markets fintech will affect.
“The cost savings from automating suboptimal processes can be reinvested in longer- term strategic initiatives, such as the application of Blockchain and smart contracts to clearing, settlement, and reporting. Industry utilities or third parties should be explored for the provision of a wide range of post-trade services,” says the EY report.
While Banking Interest Grows, Sondergaard Still Sees Potential Blockchain Opportunity In Financial Sector and Other Industries
Sondergaard understands the technology has more than hype supporting it. The Gartner executive says, in the finance world, blockchain technology “brings an opportunity to actually drive the cost of money down.” Additionally, he believes the protocol could transform the clearing house model. Because of this ability, Sondergaard says, many industries besides finance could use blockchain technology.
He also explains that distributed ledgers become cumbersome when trying to scale. “When you overlay it with the requirements of everybody having the complete ledger running on your environment, it starts to be very heavy as you scale it,” said Sondergaard.
Sondergaard says throughout the next few months we will see announcements from “large vendors” concerning blockchain contract clearing. It will play a role due to its extension of peer to peer models the Senior Gartner official stated. Sondergaard explains peer-to-peer models have “impacted our lives today.”
‘Blockchain Hype’ Is Progressing Further Than People Realize
Furthermore, much of the blockchain “hype” may help bring real world use cases to fruition.
According to Reuters, tech giant IBM says 15 percent of the top banks worldwide will have commercial grade blockchains by next year. IBM expects 65 percent of banks to have models running in three years. These findings came from a survey the company initiated with 200 banks. Then the company said it furthered studied comments from another 200 ‘other’ financial institutions.
Distributed ledger technology is gaining steam, but many critics wonder how much of it will become realistic. The question is how long will the banking interest last, and will the next few years see blockchains take over traditional markets?
What do you think about blockchain technology’s hype? Let us know in the comments below.
Images via Shutterstock and Pixabay.
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