Blockchain technology was dismissed as a fad and compared to “pixie dust” at the Treasury Committee’s digital currencies inquiry.

Giving evidence yesterday, Martin Walker, director at non-profit group the Center for Evidence-Based Management, said the emerging digital currency had little to offer financial services.

“All that it takes to make a credible idea into a fad is people just switch off their brains and stop thinking,” he told MPs. “Over 20 years in and around the banking industry - blockchain is a fad, but I have seen many fads in my career.”

Walker said distributed ledger technology has “little to nothing” in terms of demonstrable benefits, comparing it to “magic wands and pixie dust”.

He added that it was also unhelpful to talk about blockchain as if it was a singular thing, arguing that most developers have strayed far from the original principles developed to underpin cryptocurrencies.

Walker did acknowledge that the hype had provided a catalyst to get banks to update parts of their business like trade finance. But he cautioned that many in finance are starting to see blockchain as some kind of “universal panacea” in the face of the hard work required for genuine innovation in finance.

Also giving evidence to the committee were blockchain companies Everledger and Ripple, along with a researcher from King's College London, all of whom gave far more positive views on the technology.

Blockchain is cryptographically sealed and allows data to be stored, validated, and synchronised, preventing it from further editing after a data agreement.

The Treasury launched its inquiry into digital currencies back in February, aiming to examine the regulatory response from the government, the Financial Conduct Authority, the Bank of England, and how regulation could be balanced to provide adequate protection for consumers and businesses without stifling innovation.

Simon Wax, partner at accountancy and advisory firm Buzzacott, commented that the debate over blockchain highlights a fundamental challenge with ‘hyped’ technologies, and one that many of the UK’s tech companies can come up against when they’re looking to grow.

“Investors, the media and even customers are always looking for companies developing the ‘next big’ technology, leaving scaling companies feeling under pressure to position themselves as at the forefront of innovations like blockchain,” he said, adding: “There’s a risk that growing companies may overuse these buzzwords, latching onto a trend in the hope that investors will simply hand money over.”

He suggested that to avoid the pitfalls of the ‘hype cycle’, tech companies must be authentic and realistic about what they’re developing. “By building a plan based on authenticity rather than buzzwords, entrepreneurs can secure long term success, rather than becoming a flash in the pan.”

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