Why has blockchain implementation in banking failed?

Baozou Comment : The hype of blockchain has made everyone ignore the true meaning of blockchain. As the underlying technology of Bitcoin, the decentralized nature of blockchain is an important reason for Bitcoin's huge success. The main reason why financial and insurance companies fail to implement blockchain technology is the lack of understanding of decentralization, which is like installing a jet engine on a bicycle. It is a temporary solution but not a fundamental solution. It is inevitable that the implementation of blockchain technology in banks will fail. If banks can realize the importance of decentralization, they can successfully implement blockchain technology.

Translation: Nicole

The main reason for the failure of financial and insurance companies to implement blockchain technology is the lack of understanding of decentralization.

Blockchain technology has been hailed as the best remedy for any industry that relies on data, such as finance, real estate, and insurance. However, the technology has not been effectively implemented. Billionaires in the industry are eager to use emerging technologies and keep up with the latest trends, but their lack of understanding of the basic elements of blockchain is also the reason for failure.

Challenges facing banks

Ever since the development of Bitcoin gained momentum and shook up the market dominance of large banking service providers around the world, banks have immediately tried to create their own digital currencies or blockchain networks to reduce the losses caused by Bitcoin.

Banks and large financial institutions wanted to create a Bitcoin clone so they could profit from the same benefits that Bitcoin users get from the digital currency. Banks quickly turned to reputable companies researching blockchain technology and developing a killer platform that could optimize the banking industry.

Ignoring decentralization

However, there is a major problem with this approach. They ignore the most important aspect of blockchain technology, which is also the aspect that contributed to the success of Bitcoin: decentralization. Banks, insurance companies and real estate companies are starting to use blockchain technology to handle existing operations. At the same time, they also want to explore ways to optimize their systems with blockchain technology.

Put a jet engine on a bicycle

But in essence, this is like putting a jet engine on a bicycle and expecting it to go faster. This is an approach that lacks logical theory and is the reason why blockchain implementation in the banking industry has failed. To make matters worse, there is currently no blockchain proof-of-work mechanism demonstrated to the public.

Bloomberg:

“The term blockchain has been abused for so long that no one knows what it really means.”

— Wayne Vaughan (@WayneVaughan) September 2, 2016

If banks realize that decentralization is the key to the cost-effectiveness of the Bitcoin network, they can successfully implement blockchain technology. However, this also means that banks are ready to embrace and adopt Bitcoin.

They were not ready to admit their defeat.