Rod Drury, the CEO of New Zealand-based multi-billion dollar software and accounting service provider Xero, stated in a recent interview that private Blockchain networks currently being developed by banks and financial institutions are essentially a solution looking for a problem.
Are private Blockchains necessary?
The argument behind the development of private Blockchain networks and platforms that banks and financial institutions provide is that strict international and domestic financial regulations disallow the deployment of decentralized networks.
Most regulatory frameworks regulations are in place primarily due to the ambition of governments and central banks in maintaining an absolute monopoly on financial data, transactions, and private information.
As such, Xero CEO Rod Drury describes the financial industry as a ‘surveillance culture’ and demonstrates the ideals of “tribalism.”
Drury is one of the very few technology veterans in the industry that understands private Blockchain networks will operate more or less identically as traditional SQL databases in the sense that governments and law enforcement will have full monopoly on the transactions settled on bank-supported Blockchain networks.
If Blockchain networks fail to demonstrate the characteristics and features of an immutable and irrefutable ledger, it will pose no difference than traditional financial systems set in place.
“I think it’s mathematically interesting but I think the nature of the world at the moment — surveillance culture and tribalism — means it’s very unlikely that a distributed view of the money supply is ever going to happen.”
Solution looking for a problem?
One tip that venture capital firms, accelerators, and angel investors give to startups and entrepreneurs is the importance of building a technology, product, or a service that acts as a solution to an actual problem.
Blockchain was built initially as the protest of banks and financial institutions against Bitcoin. The goal was to create a replica of Bitcoin and rather than maximizing the benefits of users, increase profits and reduce costs involved for banks in settling cross-border payments.
“it’s a very elegant solution that’s looking for a problem,” Drury noted. “We’re always evaluating things... Never say never but we’re kind of waiting for someone to come along with a great application we can use.”
Centralization Vs. Decentralization
Drury further emphasized that under regulations and policies set in place, it is virtually impossible for banks to implement immutable Blockchain networks or any technologies that offers the slightest glimpse of decentralization.
“Quite a few of the problems we’ve looked at through a Blockchain lens — and again, love the maths of it — but when it comes to money it’s a largely centralised problem. With what’s happening around the world with intelligence and all those things, it kind of points you towards centralised,” Drury added.