Everybody’s talking about blockchain, but no one wants to utter the word that’s most commonly associated with it.
It’s like the ugly duckling of the digital currency underworld that just can’t seem to stay afloat in a sea of controversy. So much that the mainstream banks are talking about the concept of how to leverage its technology without actually having to talk or touch the concept of bitcoin.
That’s where the blockchain comes back into the mix — aka the swan of the blockchain-bitcoin tale. But sometimes, even if you put lipstick on a pig, it’s still a pig. And even if you have a princess give it a kiss, it’s not going to turn that frog into a prince.
That’s the conundrum the blockchain and bitcoin have today. Most who are talking the blockchain admit that they don’t like to associate it with bitcoin, but everyone knows that you can’t talk blockchain without talking bitcoin.
But as MPD CEO Karen Webster pointed out in her controversial column this week, it’s imperative to separate the bitcoin from the blockchain — posing the questions: Can we agree to move time, energy and brain cells away from bitcoin as an alternative currency? And to disentangle the technology of the blockchain away from it, too?
As she explains in the piece, the blockchain is a technology that is used to continuously record every bitcoin transaction that takes place. It is the distributed database or public ledger that updates itself every 10 minutes and is the technology that underpins bitcoin. And that’s the very reason why the two haven’t been able to untangle themselves from the same conversation.
But Wall Street and major banks across the world have started the conversation about the power behind the blockchain — sans bitcoin. While bitcoin cannot be talked about without talking about the blockchain, it appears the blockchain can very much be talked about without talking bitcoin.
Still, some are still using them interchangeably. And until that stops, the blockchain won’t be able to reach its full innovative potential among the mainstream financial services.
And that’s where the conversation has begun to shift among the financial service players who realize the power of the blockchain when the other B word is left out.
Take, for example, what ex-JPMorgan exec Blythe Masters — who just this year traded in her Wall Street getup to join the digital currency world — said about the blockchain and distributed ledgers.
“Distributed ledger technology does have the potential to be disruptive of certain business models. But it has at least as much potential to be enormously empowering of existing business models in terms of making them lower cost, more efficient and less risky,” she said at a conference earlier this year.
New research from Greenwich Associates seems to confirm the concept that blockchain and bitcoin don’t have to go hand in hand.
In fact, nearly three-quarters of financial industry experts agree that blockchain technology can take off and thrive, even if bitcoin doesn’t. According to reports, Greenwich Associates found that 73 percent of FinServ experts agreed that the blockchain is not dependent on bitcoin to impact the market.
Additional findings conclude that nearly one-third (32 percent) believe that legal and compliance officials will trust payments made via the blockchain, and an additional 38 percent said that they believe these personnel will “eventually” trust the technology.
Thirteen percent of those surveyed said that “more regulation is needed” before regulators and compliance officials can establish trust in payments via blockchain. About one-tenth, however, said that this trust is unlikely to ever take shape in the market.
“For the blockchain or another distributed ledger to provide this clarity to the market, market participants and the legal system would all have to recognize the ledger as the golden copy of who owns what,” the report concluded. “This is technically possible but not a reality just yet."
Regardless, the industry seems to think that should the blockchain take off as an accepted technology in payments, bitcoin doesn’t need to be a part of the equation — except for those with a background in bitcoin.
“This result doesn’t scream controversial,” the report said. “But while capital markets professionals (who make up most of our sample) are convinced, those with backgrounds in bitcoin and the blockchain are not."
Still, for now, bitcoin continues to drag down blockchain conversations. And that’s as more financial leaders have stepped up to defend the concept of distributed ledgers and digital currency without naming bitcoin by name.
“We shouldn’t be focused on the adoption of a digital currency. The underlying technology is a powerful one, and I think that we will see adoption of that technology much sooner,” said Mariano Belinky, the managing director at Santander InnoVentures.
Alex Batlin, the former engineer heading up UBS’ London-based blockchain innovation lab, said in an interview with CoinDesk: “In principle, it’s [blockchain technology] probably one of the biggest confluences of technology and business right now.”
For now, most of the discussion seems to be on explaining the technology of blockchain. Since the easiest comparison to make people understand how it works is to throw bitcoin into the mix, it makes sense that the bitcoin name hasn’t faded away.
Luckily, there’s more and more pieces floating around about how the blockchain works, why it underpins things like bitcoin, but means so much more than what most think about the digital currency world.
In a contributed piece featured on Forbes this week, Arvind Krishna, senior vice president and director of IBM Research, shares how the blockchain — which he noted is “little understood outside a small fraternity of computer scientists” — has the potential to overhaul our financial and business ecosystems.
“To me, blockchain is the more interesting phenomenon. It’s a completely novel architecture for business — a foundation for building a new generation of transactional applications that establish trust and transparency while streamlining business processes. It has the potential to vastly reduce the cost and complexity of getting things done. Essentially, it could help bring to business processes the openness and hyper-efficiency we have come to expect in the Internet Era,” he wrote.
Everything from its integration of Internet of Things tech to how data (and money) is transferred and shared makes a good case for blockchain’s tech. But for now, Krishna wrote, we’re still “pushing old procedures through new pipes.”
And that’s where the change may be needed.
“Blockchain-based systems could help radically improve whole industries, beginning with banking and insurance. But its impact could be much broader. It could make a difference whenever valuable assets are transferred from one party to another and whenever you need to know for certain that a piece of digital information — anything from electronic artwork to the terms of a business agreement — is unique and unchangeable by any party without the agreement of all parties,” he continued.
And that’s the real value that isn’t being discussed as much — because the conversation still has bitcoin trailing behind. So perhaps for now, it’s best to take the lipstick off that pig and call things what they are: Call bitcoin, bitcoin and blockchain, blockchain.
Bitcoin Tracker Week 94
The Good, The Bad — The Top Bitcoin Stories Of The Week
Yep — Another Big Bank Gets Serious About The Distributed Ledger
Speaking of the blockchain … In the latest of a slew of financial institutions to embrace bitcoin, SAN InnoVentures, the investment and venture arm of the Santander Group, is putting $4 million into a distributed ledger technology platform via Ripple in a Series A round.
That investment brings the open ledger company’s Series A to $32 million as it seeks to bring new investors to the digital assets tracking world and brings total funding to more than $38 million.
Bank Innovation reported that Santander is not among the baker’s dozen of banks that last week linked up with a consortium of lenders to discuss the blockchain and its place within the financial world — an event that came as Australia shuttered some exchanges. The debate over the virtual currency continues unabated. But the capital raised, as Bank Innovation reported, means that the lender is “doing something” rather than just studying the future.
Blockchain Innovators Get A Boost
Some venture capitalists are gearing up for the age of blockchain innovation. One venture capitalist group says it has already caught on to the trend as part of its confidence in the future of digital payments.
Reports by DCEBrief on Tuesday (Oct. 6) said Boost VC revealed that it has already provided blockchain startups with $52 million since launching in 2012. The funds landed in 52 different startups, reports said.
Boost VC has made clear the faith (and money) it puts in the power of blockchain technology, previously stating that it is “committed to empowering great companies to build the future of these industries,” according to the site.
Ingenico Brings Bitcoin Payments To The POS
Ingenico, a French-based global payments provider, has paired up with BitPay to bring bitcoin payments to the point-of-sale terminal.
The companies announced this week a new integration to allow merchants to accept bitcoin payments, which is an industry first for the payments ecosystem. As noted in the announcement, bitcoin, by its very nature, is most commonly associated with eCommerce payments, but now the digital currency is headed for the traditional brick-and-mortar side.
This technology made its debut on Tuesday (Oct. 6) in Barcelona at Blockchain Week, which concluded on Oct. 8. This payment integration was created by BitPay but installed on an Ingenico terminal ICT250. For those consumers wanting to cash in their bitcoins at the POS, they can do so by showing a QR code, which can be scanned on a mobile phone to make a payment.
Bitcoin Extortion — The Crux Of The Cryptocurrency World
There’s two troubling concepts that make it hard for bitcoin to shed its criminal namesake: DDoS attacks and ransomware.
Both not new concepts, of course. But the proliferation of cyberattacks have shed new light on the dangers of cryptocurrency when put in the wrong hands. Having a currency that’s 100 percent digital opens up the world to a whole slew of issues and is one of the reasons banks are so weary about bitcoin.
As one article points out, the rise of cryptware and ransomware have opened up new realms for hackers to exploit, and, of course, we all know that when a hacker is demanding money, they aren’t demanding unmarked bills in a giant black bag anymore.
Nope, they want it in bitcoin.
Winklevoss Twins’ Bitcoin Biz Open For Business
This license is different than the BitLicense, which is more of a business license for those that process bitcoin transactions. For bitcoin exchanges, the regulatory pressures are a bit different. Now, however, with its new license under its belt, Gemini is able to operate as a chartered limited liability trust company.
Trading across the bitcoin exchange officially begin on Thursday (Oct. 8).
In a blog post announcing the opening, Cameron Winklevoss posted a note on behalf of himself and his brother, Tyler, about what the company has been working on leading up to the launch and what’s next for the bitcoin exchange. His blog post focused on four big keywords: product, security, licensing and compliance.
"Meeting the high-water mark of banking compliance is no small task, especially for a startup, but we felt that doing so was crucial. Bitcoin is an island right now, and if we are going to build a bridge to the financial mainland, then Gemini must look and feel as safe, secure and compliant as any other top-tier financial institution in the world. This includes, among other things, creating a robust anti-money laundering (AML) program, strong internal controls and procedures, a comprehensive security program and maintaining significant capital reserves,” Winklevoss wrote.