Until Next Time
We hope others will benefit from the Boston Fed blockchain team’s journey, including challenges, lessons learned, and areas for continued exploration. We also encourage others to share what they learn from their blockchain experiments.
As the soap factories of the 1960s taught us, the complexity of seemingly simple problems sometimes defies theoretical models. In our view, a combination of reading, listening, and thoughtful repeated experimentation delivers the best results. This paper wasn’t written to be an instruction manual. By detailing how we planned for and charted our own journey, the challenges we encountered, the lessons we learned, and the areas we’d like to continue to explore, we did not endeavor to give definitive answers or recommendations. Rather, we want others to benefit from our experiences and draw their own conclusions.
- Small-scale experimentation offers cost-effective opportunities to learn about blockchain technology with reduced risk.
- Engaging with security partners early and often ultimately supports an assessment of viability. Even in an internal laboratory environment where some compromises may be possible, a full vetting of security is needed, and much can be learned from it.
- Open source platforms offer many advantages. However, comprehensive documentation and support may be lacking for earlier stage platforms, given the volunteer nature of the development process. Additionally, significant customization may be required depending on the use case, which means organizations should expect to invest in knowledge development for technologists.
- The lack of a stable platform means risk is significant for major changes in the architecture or tools used to impact in-progress experimentation.
- The technology is complicated. Blockchain is the platform underlying the application, so business users will not necessarily see the difference between the legacy process and one that includes a blockchain application. Therefore, much of the benefit may be in gains in efficiency and resilience, or automation of previously manual processes, rather than new or improved functionality for the end user.
- New partnerships and consortium efforts continue to form around this technology, offering additional insights and new opportunities for learning.
Development takes time, and it’s tough to predict how a technology evolves and changes based on multiple variables, including the availability of resources in funding, time, and expertise. For our purposes, blockchain technology is not yet mature. The ability to scale, manage privacy, and support interoperability with both new and legacy systems will be critical to its adoption for financial services. While we believe blockchain technology is not currently viable for significant production use at the Federal Reserve, we believe continued experimentation is essential and can contribute to the continued maturing of the platforms.
In addition, we are interested in exploring the capabilities of a supervisory node. The Boston Fed team is also active in the Hyperledger Fabric community and working with other consortium groups like R3 Corda on projects to expand Know Your Customer capabilities. There are currently many other potentially promising efforts and platforms in the market. We aren’t endorsing those we chose to work with. We simply selected those that made the most sense to us at the time.
We encourage others to share what they’ve learned from their experiments. Some hype invariably exists, and perhaps blockchain technology will not on its own bring about the kind of massive improvements in transparency, efficiency, and other areas some have predicted. But we believe it shows promise.
The views expressed in this report are those of the authors and do not necessarily represent positions of the Federal Reserve Bank of Boston or the Federal Reserve System.