For much of 2016, the Wall Street attitude toward cryptocurrency could be summed up as, “blockchain good, bitcoin bad.” Banks and financial institutions were vocal about their interest in testing out blockchain (or “decentralized ledger”) technology, but didn’t want to have anything to do with bitcoin. In 2017, as the price of digital assets like bitcoin, ether, litecoin, and ripple soared to all-time highs, the narrative shifted back, as financial giants witnessed the sudden mainstream interest in investing in cryptocurrencies.
But if you ask Adam Ludwin, CEO of Chain, which builds “private blockchains” for enterprise clients, the distinction was always misleading.
“I think the dichotomy between public and private [blockchains] is a false one, and it’s actually not helpful,” Ludwin said on stage last week at the Yahoo Finance All Markets Summit on cryptocurrency. “Instead, I would separate out whether we’re talking about a new asset—bitcoin, ether, lumens, Zcash—where you have a whole new asset class, the creation of which and the purpose of which is native to some public network,” or existing financial assets that large public companies want to move around using blockchain. As Ludwin describes it: “How can we take a share of Apple stock, how can we take a Starbucks loyalty program, how can we take a dollar that needs to move from a company in California to a company in Thailand? And how can we make those assets operate in such a way that there’s more integrity, there’s more visibility, there’s high scale.”
It’s an interesting way to flip the prevailing framing of this issue.
The bitcoin blockchain, the litecoin blockchain, and Ethereum are public blockchains, meaning that they are open-source, decentralized, and accessible to anyone (“permissionless”). The IBM blockchain that Walmart, Unilever, Kroger and other grocers recently used to track food shipments, and the rails that Chain has built for clients like Visa and Citi, are private, meaning they are accessible only to those granted access to them (“permissioned”).
Ludwin’s point is: Rather than distinguish between public vs private blockchains, focus on the assets that these companies are using blockchain to move back and forth. It’s a bit of spin, some might say, but it’s also not unreasonable. “Think of the asset first, not the architecture first,” he said.
Besides, the distinctions will soon fade further, Ludwin predicts, as the two types of blockchain work together. “Over time, I think you’re going to see a convergence,” he said. “You have a company here at Yahoo, you have a local area network, it’s private, it also connects into the public internet. There are files here that sit behind a wall, and then sometimes those files go flying out over to some other organization. Different architectures, different software companies that are going to be focused there. Over time: convergence.”
Peter Smith, CEO of Blockchain, a company that provides digital wallets for storing cryptocurrencies, agreed with Ludwin that, “Eventually there’s going to be a big convergence.”
There’s just one problem: the banks move ever so slowly, said Smith, speaking from experience—and as a result, he predicts, it is public blockchains that will spur faster innovation.
“Three-and-a-half years ago, we did some of these projects with the banks, which is something we haven’t really discussed publicly all that often,” Smith said. “And at the end of them, we came away with this real firm conviction that innovation within that space was going to be very slow. And at the same time, innovation within the public space is going to be very fast.”
Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.