Banks and financial institutions are embracing blockchain technology, the tech powering bitcoin network. The bitcoin community is happy about it as it might drive bitcoin adoption. Even though bitcoin and blockchain technology adoption is a good thing, if not done in the right order, it might turn out to be catastrophic to both bitcoin community and the organizations adopting it.
According to Barry Silbert, the well-known investor in bitcoin circles and founder of Second Market the approach to bitcoin technology by financial institutions is all wrong. Banks and financial instructions have dipped their hands directly into the third stage of adoption, without going through the first two stages which includes the use of Bitcoin as a store of value and its use as a payments network. . Instead they have directly started research on implementing blockchain ledgers.
Barry Silbert expressed his apprehension when it comes to implementation of blockchain in banks as it will lead to the creation of private federated blockchain which might eventually lead to certain adoption and credibility issues. In an interview with Coindesk, Barry Silbert has been quoted saying
“I’m surprised that they honed in on that first. A private federated blockchain doesn’t solve any major problems and ultimately I don’t have a high level of optimism it’s going to succeed. I’m surprised they have not figured that out yet and I’m surprised they are doing that first.”
Barry Silbert’s comments come at the time when nine international banks have reported to have joined forces with R3CEV, a cryptocurrency and payment solutions provider to create blockchain based transaction network between their branches for money transfer. The consortium of these banks will be using a proprietary blockchain technology instead of the open source bitcoin blockchain.
Barry Silbert believes that when there are multiple banks put together inside the same system, using a proprietary blockchain, there will be conflict of interest among the participating institutions. He also believes that the interest generated on federated blockchains with all the funding and effort going into research maybe a bit short lived and in a short time people may shift their focus back to decentralized blockchain solutions.
Barry’s comments shows the importance of open source platforms that undergoes constant development through inputs from the community as against proprietary system. Also, by trying to implement an entirely new system, these institutions may miss out of things that have already been tried and tested on core bitcoin blockchain which has already proved capable of supporting millions of transactions.