If financial firms are delaying their investment in distributed ledger technology until there is a clear winner in the market, they are in for a long wait.
The distributed ledger market will continue to be a fragmented market for the next several years, if not for always.
Despite the industry discussions of working together as a community to develop this new technology, vendors with their proprietary technologies always deliver more mature offerings quicker than industry-backed or open-source initiatives.
They have fewer cats to herd as well as dedicated development resources, fixed deadlines, and the profit motive.
Open-source technology like Linux and industry-based standards like the FIX networking protocol likely will take a good portion of the market eventually but not during the years of adoption.
Proof of concepts and limited production function will rely on the technology brought to the table by vendors.
The market has already seen the start of this as Chain has its relationship with Nasdaq and Visa, itBit has staked out the settlement process in the precious metals market, and Symbiont has struck a deal with the State of Delaware for governmental and corporate governance functions.
Once these deployments truly get traction, it is doubtful that those maintaining the platforms will be willing to rip and replace them with another platform anytime soon.
Also, it is too early to know how long the average life span of a distributed ledger could be. It might be years, or it could be decades. Bitcoin has been live since 2009, and its supporters have been discussing tweaking the platform to scale better for the past couple of years.
Financial organizations should prepare themselves for interacting with multiple flavors of distributed ledgers going forward, which might not be such a bad thing.
As long as processes powered by blockchain meet their service level agreements, does it matter what is under the hood?
The only potential drawback of a fragmented distributed-ledger market would be reconciling disparate distributed ledgers. That would require custom coding or some version of middleware to extract data from the different blockchains just as organizations do in extracting data from heterogeneous databases.
In any case, there will never be a Tolkienesque “one chain to rule them all.
