Expert Explanation Of Wall Street’s Blockchain Investment And Its Impact On Bitcoin
Blythe Master’s new Blockchain startup is set to receive huge investment from Wall Street in 2016. What could this really mean for the Blockchain technology and how much impact is this going to have on the Bitcoin market?
Blythe Masters’s new Blockchain startup is set to receive huge investment from Wall Street in 2016. What could this really mean for the Blockchain technology and how much impact is this going to have on the Bitcoin market?
There has been quite a lot of excitement within the Bitcoin environment coming into the new year as the news of Wall Street investment in Blockchain broke. The cyberspace has buzzed with various speculations on how much impact this move could have on Bitcoin.
Cointelegraph sought expert opinions for a clearer understanding of what exactly it is that Blythe and her associates are up to and whether it is indeed worth paying attention to as far as the Bitcoin market is concerned.
It’s not all about Bitcoin Blockchain technology yet
Scott Bambacigno is the Vice President and Head of Worldwide Sales at Alphapoint. AlphaPoint is a financial technology company that powers digital currency exchanges and provides institutions with blockchain-enabled solutions to store, track, and trade digital assets.
Scott made it clear that Wall Street isn't investing into Bitcoin blockchain technology at this point, what they are doing is investing into understanding blockchain capabilities. He says that Wall Street is evaluating blockchain technologies in the context of cutting costs over legacy database solutions. He continued by saying:
“The Bitcoin blockchain does some things really well but I don't know if it can meet all of Wall Street’s needs therefore there may be a need for more than one blockchain solution given the specific business use case.”
On whether this development is good for Bitcoin, Scott says:
“Yes, this is a good thing for Bitcoin, but let's not get it twisted believing that there is an imminent Wall Street rush to Bitcoin or the Bitcoin blockchain.”
Wall Street’s interest for now is on Private Blockchains
Jonathan Chester is the Founder and President of the largest Bitcoin payroll provider in terms of usage and volume, Bitwage.
Jonathan stated clearly where he thinks the interests of Wall Street lie and their implications. His words:
“Wall Street is quite interested in private blockchains. Which makes sense when you take a look at what is happening behind the scenes for services like international payments. And let me tell you, it’s a mess.”
He explained further:
“Banks currently cannot just send money to each other directly via an email because there is no way to trust the sending party. Did they have money to begin with? Are they actually sending money? Instead, the banks have accounts with one another called correspondent accounts and move money internally from one account in the sending bank into the receiving bank’s correspondent account with the sending bank. Since not all banks have correspondent accounts with one another, banks become linked together through a maze of correspondent accounts to send funds from one country to another, with each intermediary taking a fee and delaying the transaction.”
Mr.Chester insists though that private blockchains will not solve the banking problems due to the international limitations of their tokens. He said that tokens on private blockchains cannot act as settlement mechanisms between countries, giving an example where a bank in the United States could borrow money from the United States federal reserve, send the funds to a Chinese bank through the blockchain and then the funds settled by turning the token directly into local currency. He noted that the issue of trusting whether or not funds have been put onto the blockchain is still not solved and also that the process would effectively enable a bank in the US to create Chinese currency, giving rise to a political issue that requires governments to get on board, which could take a very long time.
It is all about cutting cost
On the main reason why Wall Street is investing in private Blockchains, Jonathan had this to say:
“Well, it turns out, that there is a third problem with an international transaction, and it is the fact that when funds are moving between correspondent accounts, the banks have zero insight into where the funds are unless the funds are in their own accounts. This increases costs when funds get lost between banks (which happens often, but as users we only see them as delayed transactions) since the time and manpower required to find the transactions can be costly. By leveraging a private blockchain, although you do not get improved settlement mechanisms, you get the same advantage of the bitcoin Blockchain’s transparency. This means that it will now be possible for the banks to be able to track where the funds are while they are in transit, thereby dramatically reducing the costs and delays of lost funds.”
It will eventually become all about the Bitcoin Blockchain
Asked what impact this development could have on the Bitcoin market, he says:
“It will likely not have an immediate affect on the bitcoin market. However, it will in the long term. Startups and smaller companies will likely not be able to access the private blockchains created by wall street directly and will turn to public blockchains. Seeing as the bitcoin blockchain is the most secure and most invested in public blockchain, with over $1 billion in investment and around a $6.5bn market cap, startups will likely turn to the bitcoin blockchain. With better settlement mechanisms, startups working with the bitcoin blockchain will challenge the banks with superior services. Banks, having become more comfortable with blockchain technology, will seek out better settlement mechanisms to compete with these startups or acquire them. Either way, the banks will get involved with the bitcoin blockchain, or perhaps another public blockchain should one have more liquidity. When that happens, I can’t see the bitcoin markets going down.”