The research firm has looked at blockchain as it relates to the financial services ecosystems specifically, noting that a lack of interoperability standards will prevent pervasive deployment across financial services ecosystems for at least three years.
“Blockchain standards for financial services companies are currently fragmented and immature,” says Fabio Chesini, senior research director at Gartner.
“We are three to five years until standards mature and settle,” Chesini highlights.
Setting a standard
The firm adds that these standards are critical for financial services organisations because they are constantly moving assets between clients, partners and other institutions.
“Today, bank CIOs can choose from numerous blockchains, available from either enterprise-grade approaches such as Corda, Hyperledger, and Digital Asset, or the many public blockchain standards like Bitcoin, Ethereum, Cardano, EOS, and Tezos,” Gartner points out.
“They are all trying to become the de facto state machine for value exchange and digital asset representation, smart contracts and decentralised applications. This indicates the fragmentation of the various standards,” it says.
It’s something that CIOs in the financial services must be acutely aware of, according to Chesini, especially given the fragmented state that blockchain standards currently finds itself in.
“It is unlikely there will be a single de facto standard like in the Open Systems Interconnection (OSI) model, at all levels. Given how new and fragmented the state of blockchain standards is, we expect no more than four standards to lead the market in the next three to five years,” he adds.
Hurdles to overcome
In addition to standards, the senior research director warned financial services CIOs of three additional impediments when deploying blockchain projects – governance, integration and interoperability.
Blockchain governance is important because it regulates activities occurring across the ecosystem and provides legal assurances that their arbitrary decisions will not be made as an abuse of power against other participants, the firm explains.
“Governance and management of private and permissioned blockchains in any form, including consortia, will remain centralised and hierarchical during the next three to five years, making blockchain governance in financial services a key impediment for the same period,” notes Chesini.
As for integration, specifically when seamless implementation of existing software systems, it will prove vital to the true potential of blockchain being achieved, according to Gartner.
“In the next two to three years, Gartner analysts expect all major ERP and CRM players to offer blockchain capabilities as an add-on feature for their software and SaaS products. Software suppliers, meanwhile, will integrate and upgrade their chosen blockchain versions and ensure compatibility with their own new software releases,” the firm adds.
Lastly interoperability will be both crucial and difficult to pull off, as most cryptocurrencies use differing implementations, data formats, data interchange and directories.
“As financial services companies constantly move financial instruments and assets to other financial services companies and partners, cross-industry interoperability standards are, and will be, critical,” stresses Chesini.
“Fixing these types of data exchange standards will enable numerous blockchains to coexist and to share their ledgers, as necessary. However, as blockchains are a moving target and keep evolving, interoperability solutions are still three to five years away,” Gartner concludes.[Image – CC 0 Pixabay]