Imagine spending 1 billion reais on a project only to realize in the end that it doesn’t solve the intended problem. That’s exactly what happened with the ASX, the Australian Securities Exchange, when it tried to replace a stock deposit and settlement system with blockchain. An independent review revealed that the technology would neither speed up settlement times nor reduce costs.
The project aimed to replace the CHESS system, a central deposit and settlement platform used by ASX since the 1990s. CHESS, written in COBOL, is known for its robustness but also for being a legacy system that presents limitations when it comes to scalability and integration with new technologies. The choice to use blockchain was intended to modernize this system, bringing greater efficiency, speed, and cost reduction—goals that, in the end, were not achieved.
Technology is a tool and should be used to solve a problem; therefore, the natural path is usually: I have a problem, so I look for a tool (or technology) to help solve it. However, I observe that technologies that are in the “hype,” such as blockchain, tend to follow another path: I have a tool (or technology), and I’ll try to use it to solve every problem I encounter until one fits.
The problem is that this approach can cause “false positives,” that is, use cases that seemingly work or even actually function but only in the “laboratory.” When they hit the real world, the result is complete chaos. In my opinion, this happens because, in the eagerness to be a “pioneer” or to be at the forefront of a hyped technology, or even due to some external pressure, we deliberately choose to emphasize only the positive points or qualities of that technology and often fail to think critically about the efficiency and viability of using such technology to solve a given problem.
It’s like using a hammer to drive a screw into wood. The hammer (the technology) might work in a controlled environment where the wood is soft and the screw is suitable. But in the real world, this solution is inefficient and impractical. Even so, you could convince an enthusiastic audience with this “laboratory” demonstration, garnering applause and investments. However, when this idea is tested under real conditions, the result is usually disastrous.
In the example above, it would probably be much more efficient to use a screwdriver (or a Phillips head) than a hammer. But to reach this conclusion, it would first be necessary to clearly define the problem you want to solve, then analyze the qualities and flaws of the “hammer” technology, as well as examine other similar technologies (tools), and only then select which would be ideal to solve the problem.
I know it’s not easy to know all the details before making a decision, and I’m not arguing against experimentation. On the contrary, I believe that one of the best ways to gain the necessary knowledge to make certain decisions is through experiments like POCs (proofs of concept) and MVPs. However, this is where we need to be cautious with the premise of experimentation. At this point, we cannot act like astrobiologists trying to find life on other planets, who need only clear evidence to conclude that life exists beyond Earth. We should be more like mathematicians seeking the proof of a theorem, who need to find a rigorous and comprehensive demonstration, valid in all possible cases, leaving no room for doubt.
The ASX, the Australian Securities Exchange, may have made the following analysis to decide to use blockchain: DvP (delivery versus payment) issues are very common in deposit and settlement platforms. Blockchain platforms like Bitcoin and Ethereum perform DvP all the time and have solved this problem very well. Therefore, I should use a blockchain platform to solve my DvP problems.
And it would be a very sound decision if it weren’t for one very important characteristic: the limited TPS capacity of blockchains. TPS stands for Transactions Per Second. Bitcoin processes about 7 transactions per second, while Ethereum approaches 30 transactions per second. A stock deposit and settlement platform must be capable of handling peaks of tens of thousands of transactions per second, with latency in the milliseconds—a feat almost impossible for a blockchain.
The story of ASX teaches us that innovation without strategy is a risky and expensive path. Technology is a powerful tool but only reaches its full potential when used to solve the right problems in the right way. Before embarking on any project, ask yourself: Are we choosing the technology because it’s truly the best solution or just because it’s in the hype?
Be judicious. Invest time in defining the problem, analyzing alternatives, and validating with well-founded experiments. Remember: pioneering is not about who adopts first but about who transforms ideas into lasting results.
And you? How is your company ensuring that technological decisions are made based on solid foundations and not on momentary enthusiasm?