I don’t know about you, but I’m completely confused about blockchains, sidechains and suchlike. I admit it. It’s beyond me and, if it’s beyond me, gawd knows how normal folk will make it out. The reason it’s so confusing is that we’ve recently seen the rise of blockchain companies such as R3, Ripple, Erethreum, Eris and more. What are they all doing and why do we need them? Surely a blockchain is a blockchain? Why do we need so many of them?
I asked this question around the exhibit hall of Money20/20 last week, and finally got a good answer from Chain. Chain is a partner of Nasdaq, and is working with several other leading light companies, and it pitched it that there are many types of companies developing on the blockchain protocol. They even drew a chart and split these firms into public and private blockchain developments that are either owned by the platform or offered as software.
Chain focuses on private blockchain software developments that effectively means that the company provides software that allows firms such as Nasdaq to privately clear trades in real-time. No bitcoin, no open systems. Just Chain, software and the bitcoin blockchain protocol to allow private, real-time clearing. This kind of sets the scene, and then another chart was drawn that made this even clearer.
These are the pros and cons of the blockchain world: permission vs permissionless, trusted vs untrusted, controlled vs decentralized, structured vs democratized, and so on. The gist of all of this for me is that there are hundreds of developments on the blockchain. It’s most likely that some form of controlled, permissioned system will emerge for the internet of value. Who will develop that system is the question, and what role will the current clearing systems take in that system? What will happen to the DTCC, Euroclear and Target2 structures? Will we need Swift, Fedwire, Chips or Step2? These are core questions about the future of our transaction processing systems and I don’t have the answers. Do you?