By Staff Reporter
Blockchain is a much-misunderstood concept because most people either think it is all about cryptocurrencies, or that it is too slow and inefficient and not mature enough to handle complex and large scale transactions, according to Ravi Menon, the managing director of the Monetary Authority of Singapore (MAS.)
In a speech delivered at a blockchain event in Singapore on Wednesday, Menon that the technology behind Bitcoin is “not” a solution to all problems but that it is proving to be quite valuable in areas such as clearing and settlement and supply chain management.
Most of these use cases are for business-to-business transactions using private, permissioned blockchain networks, said Menon, who is a major champion of innovation in finance.
“In networks of known participants, governed by agreements that are enforceable in the physical world, consensus models are being developed that are faster, more efficient, and more scalable,” he said. “The purists may quibble that these new generation networks do not meet all the characteristics of a blockchain. But what matters is what works and what the use cases are.”
He said it usually takes years for technology to mature and it is too early to say whether large-scale applications of blockchain will come to fruition.
“While the blockchain holds promise as a solution for some of industry’s big problems, it is not a solution for every problem,” he said, adding that “blockchain technology has matured in its capability to support many use cases.”
However, it is not suitable for all applications as many of the problems can be solved by good centralized systems.
Blockchain works best in areas where it is important to know the histories of ownership; multi-party coordination is required; and that there is no trusted central party or reliance on the central party is inefficient.
He highlighted two use cases in Singapore financial sector where blockchain technology is proving to be quite promising such as the clearing and settlement of payments and assets and trade and trade finance.
“This audience needs little persuasion on the potential of blockchain technology,” he said. “If anything, my plea to you is (to) pick a viable use-case with deep economic or social impact and work towards bringing it to life.”