By Larry D. Wall of the Federal Reserve Bank of Atlanta
A blockchain is a type of distributed database that is being touted as likely to dramatically restructure a wide variety of activities, including accounting, payments, personal identity, property records, and even voting. Yet in practice, the use of blockchains tends to be limited to proof of concept and small-scale production. One blockchain-based application has had some success in displacing more traditional methods of finance, initial coin offerings (ICOs). However, ICOs’ success appears to be less related to any superior feature of the blockchain and more to its ability temporarily to avoid compliance with securities regulation.
The gap between the blockchain-enabled disruption envisioned by some, and the rather limited usage of blockchain in practice, is due to a variety of factors. One major factor is that many of the proposed blockchain use cases require coordination across different organizations that often have very different objectives and incentives. However, another important factor is that there is no single way of implementing blockchains, and the existing implementations are still immature in many respects.