If Canada wants to be a leader in fintech, then we must understand its major facets. There are two key technological advances that are predicted to impact the finance landscape which is Big Data and Blockchain technologies.
Many key players shrug at this thought and say, “blockchain is fine, but crypto is shady.” This biased sentiment has been expressed by JP Morgan’s CEO, Jamie Dimon, since 2015. However, ironically enough, JP Morgan recently became the first bank to launch a digital coin (JPM coin). This goes to show, there are a lot of preconceived notions about this industry but the power of this new technology is undeniable.
Blockchain has essentially become a buzzword used to get big companies to pour their capital into new projects, while crypto is often demonized for having negative investment characteristics. Why is one treated the opposite of the other, when for the most part, they are inextricably linked?
The Public vs. Private Blockchain Debate
Basically, a distributed ledger that allows the transfer of valuable digital assets in a safe and secure manner is known as a blockchain ledger. These digital assets are referred to as cryptocurrencies. When you think of common cryptocurrencies, like Bitcoin, you are typically looking at public blockchains.
However, there are other options that still offer the security of blockchains but leverage more control. These are referred to as private blockchain networks, which can only be accessed via invitation, therefore, malicious parties trying to break the integrity of the system can no longer access the service.
One could argue that by removing the currency nature or exchangeability of this technology, a private blockchain can house digital assets that can no longer function as currencies, thus removing the “crypto” from the blockchain. Since only certain authorized parties are able to participate on the private network, the blockchain is reduced to its fundamental form, a data structure that is robust against hacking but forgoes the element of true decentralization.
Let’s think of the little guy
It’s really important to consider the creative potential of the technology at this point. Without cryptocurrency, blockchain is simply another way to structure data. This may be effective at making the internal IT systems of many companies more efficient and secure, and there is certainly value in this proposition, but a significant amount of potential change is being overlooked if this is the singular focus.
It’s also worth noting that since private blockchain projects are essentially no longer decentralized, middlemen will still be middlemen. The abuse of this power that crashed the economy in 2008 will continue to be a plausibility.
Essentially, by removing the public element of exchangeability and subsequently cryptocurrency from the equation, the open-source decentralized nature, that makes this technology so appealing for small businesses and end-user control, completely disappears.
The companies that have shocked the world in the past few decades were created in dingy garages rather than glass boardrooms. This is why it’s important to support innovation efforts from all players, public or private.
The fact of the matter is that deploying a whole new blockchain from the ground up is a much more arduous process than simply deploying it on a pre-established network with a flexible protocol, like Ethereum or EOS. This is why these projects are important when it comes to how accessible this tech is for the novice entrepreneur.
The last time I checked, Ethereum was a publicly-traded cryptocurrency. The bottom line being, the potential of blockchain is fundamentally tied to cryptocurrency. Therefore, shutting down one will almost certainly stunt the growth of the other. This is something our legislators should consider before villainizing cryptocurrencies.
So let’s get this straight…
The recent villainization of cryptocurrency juxtaposed against how favorably the corporate world views blockchain is disingenuous and dangerous to the untapped potential of this technology. There are benefits and drawbacks to both public and private blockchains, but at the end of the day, public blockchain networks serve the purpose of making it easier for the small players to explore their decentralization ideas and allows end-users to maintain control.
The internal systems of big companies can certainly be made more efficient with this tech, and this process is highly encouraged, but there is also the possibility that some of these corporations that act as middlemen, may actually be inefficient in themselves through a broader lens. This possibility should not be suppressed through a short-term focus on the flawed investment characteristics of publicly-traded crypto assets.