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Blockchain transactions verified by "miners" are seen not merely as the future for financial markets. Admittedly in a wholly a totally different context, Mark Twain warned, "a mine is a hole in the ground with a liar standing next to it." Are blockchains the future or a will they be a geomagnetic flash in the pan or a Chinese stirfry?

The inelegance of the term "blockchain makes it sound like something extra, extra secure to stop for your slaves escaping. But any initial impression belies blockchains’ claimed liberating potential in financial markets.

Far from "blocking" or "chaining" anything blockchain technology, in its most hyped exposition, promises freedom from the oppression of third-party intermediation. "Oppression" being a relative term. But costing billions of dollars in transactional inefficiencies each year intermediation could, apparently, disappear through decentralising the execution and clearing of transactions.

Blocking progress

It used to be assumed that anyone who understood blockchains or has used Bitcoins is a drug dealer, arms merchant or money launderer. Their freedom from oppression was the inability of the police to get their heads around the dark web.

Now a blockchain expert is more likely to be a "rocket scientist" working in the product development department of an investment bank.

Banks, institutional investors, clearing houses, brokers – any outfit that is dependent on third parties for timely and secure settlement of transactions is seeking a blockchain strategy.

Set in digital stone

Advocates of blockchains point to the advantages of speed, accuracy, transparency and that transactions can be verified indeed, with no sense of irony, they claim virtual deals can be set in stone "set in stone" (that would be a virtual stone I guess).

However, there are warnings, such as those from the Federal Reserve Bank of Atlanta and the OECD that the effect of geomagnetic disruption arising from a solar storm could scupper power supplies and compromise information technology functions. Counter arguments are that a solar storm would have to be extreme to pop the Cloud.

But closer to home (back on Earth) the failure of the Bitcoin exchange Mt. Gox or the current crack down on Bitcoin by the Chinese central bank or hacking of a billion names on Yahoo! and other failures attributable to crime or incompetence could be enough to induce a bout of Ludditism in the face of "Cloud clearing" and other possible iterations of blockchain activities.

Cloud clearing

Perhaps of greater concern is the threat posed to the intermediaries who will question the security and reliability of blockchain disintermediation. They may really be the block in the chain of blockchain development. A truth clearinghouses will have to confront is that the massive investment is taking place in Silicon Valley and in the financial sector is occurring because the potential cost savings of blockchains are huge.

Ironically it is cost savings that have driven the structure of the centralised clearing industry we have today that will ultimately put into question its existence.

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