Federal Gov’t Bitcoin Advisor: Blockchain Startups are Confusing
LedgerX co-founder, Paul Chou, stated that most of the projects led by blockchain startups to implement distributed ledger technology in the traditional financial sector are extremely misguided.
Recently, institutional trading and clearing platform, LedgerX, co-founder and CEO Paul Chou, stated that most of the proposals and projects led by blockchain startups to implement distributed ledger technology in the traditional financial sector are extremely misguided. The former code-writer for Goldman Sachs said in an interview with the New York Business Journal:
“A lot of the proposals for using blockchain without bitcoin are extremely misguided, Maybe incredibly misguided, and certainly not proven.”
Since early 2015, the Bitcoin space has seen an explosive growth of blockchain startups or distributed ledger technology providers which facilitate enterprise-level infrastructure for financial establishments and banks.
The emergence of these startups, such as former JPMorgan Chase executive, Blythe Masters’ Digital Asset Holdings, has encouraged the involvement of the world’s leading banks in developing permissioned blockchain networks to settle transactions and remittances securely with lower transaction fees.
Notably, the R3 consortium, a collaborative project of several multi-billion dollar banks, including Citibank, HSBC and Wells Fargo, attracted major financial institutions to participate in the development of an Ethereum-backed blockchain network in which banks connect to a shared ledger in order to secure and process various financial activities.
The efforts of blockchain-focused startups and financial establishments to develop permissioned blockchains has however been heavily criticized by Bitcoin experts for a lack of economic viability and consumer benefits. Experts state that the major issue with these blockchains are that they are not different from existing banking platforms in terms of privacy and innovation. Like conventional banking systems, permissioned blockchains are centralized, since network administrators have the power to manipulate transactions.
While Chou’s company develops Wall Street products based on the Bitcoin blockchain, most of the blockchain startups in the industry are focused on developing independent blockchain networks which tend to be unsecure and unreliable. Furthermore, Chou emphasized that companies must understand the technology and find a real-world use-case before implementing it.
“What we’re really hoping is that the regulators and staffers can better craft future regulation with their increased understanding of bitcoin and the blockchain after the meeting. But also, that other financial executives in the private industry will start thinking about how they can use it for their own use-cases,” added Chou.