While the International Word Bank Organization believes that distributed ledger technology (DLT) could fundamentally transform the existing financial sector, the World Payments Report 2018, published on October 16, 2018, concludes DLT cannot keep up with the financial market demands due to many problems and challenges facing DLT adoption.
Public DLT Technology Faces Many Limitations and Challenges
The World Payment Report 2018 was created by Capgemini, a multinational consulting and technology company, in conjunction with BNP Paribas, a leading French international banking group. The report consisted of a primary research based on executive interviews and online surveys. While the paper explored the banking industry’s openness and adoption of new payment models, DLT was a critical emerging technology and payment infrastructure discussed in the report.
The paper recognized that while banks are assessing the potential of DLT to boost transaction transparency in the short-term and increase payment efficient in the long-term, there are, however, many limitations with the technology. 85.9 percent of respondents saw the lack of interoperability as a big challenge, 83.1 percent stated lack of clear regulations as problematic, while 77.1 percent noted that its inability to scale quickly was a significant concern. Over 60 percent of participants saw that issues such as security, cost of implementation and time taken to add a block were also significant factors.
Due to DLT’s challenges and limitations, the vast majority of DLT innovations have been limited to research labs or have remained at the Proof-of-concept (POC) stage. Furthermore, blockchain applications become very difficult as they grow in size, especially public blockchains. Their growth also leads to an ever-growing energy consumption issue. According to the Digiconomist, Bitcoin currently uses as much electricity consumption as Austria.
Private Blockchains Shows Greater Potential
While the World Payment Report 2018 explored the limitations of DLT and blockchain technology, a new study by The Depository Trust & Clearing Corporation (DTCC) released on October 16, 2018, demonstrated that private blockchains could, however, support trading volumes in the US Equity Markets. The study conducted by Accenture, Digital Asset and R3 show that DLT can process an entire day’s volume of trading which is the equivalent of 115,000,000 daily trades.
The press release noted that public blockchains supporting cryptocurrencies were reasonably slow, operating at only a single or double-digit performance. The DTCC however, managed to show that private blockchain networks can undergo and handle a significantly more significant number of transactions.