While more banks and businesses are delving into and even getting comfortable with the idea of blockchain, some businesses are removing themselves from it. Sort of.
This week Goldman Sachs opted out of renewing its membership to the R3CEV blockchain consortium. The departure does not mean, however, that the bank is steering away from blockchain entirely. In fact, the Wall Street Journal says Goldman has plans to work on its own blockchain-related endeavors.
As for what those endeavors are, experts have some speculation.
“I think Goldman Sachs leaving R3 demonstrates both the opportunity for the bank to develop blockchain technology for internal use ahead of their peers as well as the challenges of banks working together using peer-to-peer payment solutions,” said Anthem Blanchard, CEO of Anthem Gold, a peer-to-peer blockchain metal company based in Austin.
Other experts say that the decision to depart from the consortium is indeed a potential positive, in that some banks are deciding to steer their own course within blockchain technology opportunities.
“[Goldman’s plan] confirms my view that the banks have identified a need to do a lot of internal work on their own use cases, which means the market for blockchain software is going to be much, much bigger than just a handful of consortia,” said Preston Byrne, COO and general counsel at Monax Industries.
But what does that say about the consortium? Some experts, like Sandeep Kumar, managing director of capital markets at Synechron, say the departure signals that the consortium model has limitations and that other companies with memberships may also jump ship.
“As R3 reworks its membership model, Goldman Sachs leaving could create a wave of other companies leaving the consortium and breaking out onto their own to form mini-consortiums with two to three banks and non-bank intermediaries,” said Kumar. He underscored the fact that Goldman has not only invested in blockchain startups like Circle and Digital Asset Holdings, but has also publicly stated that the business has conducted research related to the financial services industry, saving billions of dollars through blockchain technologies. “Their commitment driving forward digital innovation and belief in the potential of Blockchain is not in question.”
Another bank’s blockchain commitment that seems not firm is Germany’s central bank. This week, the bank is holding its four-day conference, entitled “Blockchain Technology – Opportunities and Challenges,” which is co-organized by Deutsche Bundesbank and the Frankfurt School of Finance and Management. Both startups and regulators are invited and anticipated to be in attendance of the event that will include topics such as the future of bitcoin and applications of blockchain.
Experts are applauding the bank for hosting an event like this and say even more are needed.
“Central banks looking at digital currency can help eliminate shadow transactions and curb usage of ‘black money,’ so this is significant usage,” said Kumar. “More so than events, the banks that are more advanced in their thinking are likely to be spending their time and energy on pilot projects to benefit from first mover advantage and then perhaps holding conferences or [mini-consortia] to enhance their ecosystem and create adoption for their projects.”
Beyond banks, however, there is the trend of blockchain technology finding its way into a variety of things — including the Internet of Things (IoT).
Some experts say that blockchain will be making a significant appearance in the IoT, but it will engender more secure networks where devices can interconnect with better reliability. Authentication through devices will be a main focus, and the ability to scale to support devices by the billions will be possible.
The examples of IoT-related industries getting on the blockchain trend could be endless, experts say.
“Through its ability to automate the audit feature and distribute database cost through added utility, blockchain peer-to-peer decentralized databases have the ability to reshape the future of inventory management,” said Blanchard.
Kristian Gjerding, CEO of CellPoint Mobile, gave the example of the travel sector. Blockchain may be able to simplify a passenger’s journey and ultimately connect closed-loop authentication and identification systems that are already in use at some airports, all while melding with a slew of other everyday activities in people’s lives.
“Blockchain processes [could] authenticate and verify a unified ID that will help airline passengers move quickly and securely through all of the various points during travel — checking in at the airport, passing through security and customs, board and deplaning, tracking baggage, etc.,” said Gjerding. “When passengers leave the airport, blockchain now has the opportunity to connect a range of other IoT activities to that same verified ID, such as authenticating my identity and payment as I board a bus, get on a train or hail a driverless Uber.”
The IoT assumes seamless connectivity and verification among the devices and activities involved in people’s lives, he said, and a blockchain-supported ID has real potential to connect travel-related activities with other daily activities and interactions.
However, he said that for that to happen, “governments and public agencies would also have to embrace blockchain processes for those broader connections to materialize, and that’s a key challenge.”
Time may be of the essence, as they say, and it may not take much for where blockchain will show up next.