Blockchain finance draws lines in the sand
Week after week, industry insiders and cryptocurrency pundits have looked on as blockchain-mania has swept the world, grabbing a choke hold of the financial industry and governments with talk of consortiums, private and permissioned distributed ledgers.
The technology has even shown signs of seeping into the realm of creatives and musical artists as a less centralized fiscal environment — the benefits and advantages of control, security and speed — are beginning to take seed and the future of digital transactions has never looked so promising.
However, Blockchain projects like R3CEV, Digital Asset Holdings and Blockstream have shown the willingness of big players to draw lines in the sand, jumping off the fence into a specific yard of influence.
The largest consortium stands in R3CEV's corner. The fintech innovation firm boasts a 42-member group containing some of the world's largest, most profitable financial players, and reportedly there are plans to include non-financial members.
R3CEV recently completed a successful distributed ledger experiment that spanned 11 of its member banks across four continents, a list which included Barclays, BMO Financial Group, HSBC, TD Bank and Wells Fargo. The technology came in fact from Microsoft's collaboration with ConsenSys, that is, the Ethereum Blockchain-as-a-Service, by way of Microsoft Azure.
Startup Digital Asset Holdings, described as "a New York firm developing blockchain solutions for the financial services industry," duly secured investment from fifteen financial institutions, including lead investor, JPMorgan Chase, which is not surprising as DAH is itself led by former JPMorgan Chase banker Blythe Masters.
Larry Loeb of SecurityIntelligence.com wrote that: "[Digital Asset's] products serve the entire financial ecosystem through the creation of tailored business logic applications, which use privately permissioned networks that employ a cryptographically secure shared infrastructure."
Late-comers to the investment ring, Goldman Sachs and IBM, more recently threw their hats in for the New York-startup, helping push the latest investment round from its original $52 million tally to over $60 million.
Then there's Silicon Valley-based Blockstream, an open source protocol-level technology committed to developing from the Bitcoin Blockchain via what they term 'Sidechains'.
It is yet another deviation in the race to adopt the most commercially viable blockchain technology.
Blockstream announced $55 million in Series A funding, with a total reported investment amount of $76 million. The swath of money arrived from investors like French venture capital firm AXA Strategic Ventures, PriceWaterhouseCooper and Hong Kong VC firm, Horizons Ventures.
In Japan, SBI Holdings announced its partnership with Ripple to pursue distributed technology of their own.
This week's news illustrates the paradigm shift occurring in the way data will be collected, used, stored and exchanged, be it financial or otherwise, in the coming future. While the blockchain is touted by some as next generation technology, it's certainly appearing much closer to practical use.
Will there be a blockchain for all blockchains? Perhaps.
As these consortiums, pioneers, technologists push forward with their respective 'brands' of blockchain technology it's still clear the need will exist to tether distinct systems in some shape or form.
Private, permissioned blockchains perhaps decentralizes the system, but what happens when institutions utilizing R3CEV's ledger technology must do business with Goldman Sachs or IBM in some kind of outsourcing deal? Perhaps companies will be part of multiple blockchains or cross compatibility may be the ultimate objective.
San Francisco-based Tendermint who is behind an architecture that will allow for the creation of blockchain technologies through a simple and intuitive platform throws a nod to the need for flexibility in application-building.
"There is a lot here that no one is thinking about and we're already close to solving. For example, if you have a consortium of 40 banking nodes, how do they decide how to add or remove a node? How do they decide to accept or reject a proposed application?" said Tendermint co-founder, Dustin Byington.
Distributed ledger technology may decentralize but cross-connectivity and adaptability is the only path to mainstream success. The underlying motivation, to track information, ownership or payments, on a global scale, exists for all businesses. Being able to incorporate the diverse needs that stretch beyond financial consortiums and governments is thus crucial.
As it sits, however, the financial industry appears fine in painting itself into a specific blockchain corner. Let's just hope the technology that grows out of this doesn't develop into something wholly proprietary.
Communication and compatibility between systems and applications is an inevitability to achieving broad success that will transcend the lines currently being made in corporate, industry, and digital currency.