In the new report published by Goldman Sachs in its “Profiles in innovation” series the experts put forward the most promising real-world uses where the distributed ledger can really make a change.

“Blockchain has captured the imagination of Silicon Valley and Wall Street alike.” This is the first sentence of the report, which follows previous issues in the series on virtual and augmented reality, drones and the “factory of the future.” Like many others, Goldman Sachs investment researchers believe that blockchain implementation may improve transparency, security and efficiency of existing businesses and create new ones, saving billions of dollars. However, they justly point out that blockchain discussions are often too abstract, and offer their vision of real-life application of the technology.

For instance, says the report, if used by P2P lodging services such as Airbnb, blockchain can securely store users’ personal and payment data, history of transactions and reviews. The total profits are estimated in $3 to $9 billion before 2020. It could also revolutionise US electricity industry by creating a distributed market where users could sell their surplus solar energy to other consumers. In this case, the annual profits could make $2.5 to $7 billion.

Other possibilities examined in the research include land registration systems (only in the US, the implementation of blockchain can save $2-$4 billion per year while in the corruption-ridden third-world countries it could be even more profitable), streamlining clearing and settlement of cash securities (saving up to $11-$12 billion in annual fees and charges) and improving efficiency in anti-money laundering (AML) and “know your customer” (KYC) compliance (cost savings evaluated at $3-$5 billion).

However, while the distributed ledger can improve efficiency and transparency, reduce fraud and facilitate secure decentralised transactions, it is not a “cure all”, warn the authors. Besides, its adoption will pose a number of challenges. There will be a need to standardise blockchains as there will be many of them to interoperate with each other. The counterparties may fail to introduce a blockchain because of lack of consensus about the business process or commercial conflicts. It may endanger the privacy of the participants. Finally, as “any distributed database is inherently slower than a centralized one,” it is not yet obvious that blockchain could be quick enough “for high-speed, high-volume applications.”

Nevertheless, the authors believe that blockchain prototypes will be implemented on a limited scale within 2-5 years from now and reach broader acceptance in 5-10 years. These blockchains will mostly be permissioned, used where the “trust is already established among participants” and protecting the users’ privacy.


Alexey Tereshchenko