Big businesses and blockchain

More recently, the R3 consortium looked like Nick Marshall, the hero of Mel Gibson from the movie What Women Want . He was the alpha male of the blockchain world, a gift from Wall Street for the distributed ledger technology industry. The company exuded confidence, being able to equally seduce both technical experts and representatives of the financial industry. It seemed that the whole world was one solid gold mine lying at her feet. And after that an alarming bell sounded, and with it the realization that not everything turned out to go as smoothly as it seemed.

The decisions of several large banks to leave R3 should by no means be regarded as a terrible omen for the consortium, but this event still brings us back to the eternal riddle: what does the business really need from blockchain solution providers?

Banks are running

A consortium of about 70 major players in the banking sector is a big thing. In such organizations, enormous talent and influence are embodied. Blockchain has a lot to offer for the financial world and the mission of R3 was to keep their promises.

At the end of November, a number of large banks left R3. As a result, experts began to question the company's ability to provide at least some valuable results during this time. According to rumors, a total of 7 banks want to leave the consortium at the moment.

The flagship project R3 called Corda - “a zero-cost distributed ledger platform designed to record, manage and synchronize financial arrangements between regulated financial institutions” and the registry is at the stage of confirmation of the KYC concept, obviously does not meet the expectations of the organization’s partners. Christoph Bergmann from the BTCManager profile news portal made the following conclusion: “Both Corda and the KYC blockchain can be relevant solutions for the tasks of the banking industry. However, as the last outflow of banks from the organization showed, none of the R3 projects, apparently, impressed the big thing that everyone was waiting for. Maybe the three [of those who left the bank at that time] just realized

And although we do not know what is happening behind closed doors, we can say for sure that if R3 is not in the thick of the impending battle for the soul of blockchain, then this fact in itself will already be an indicator of the value that it offers.

From the very beginning, the consortium was a magnet for financing and highly professional personnel. In particular, he managed to attract the best representatives of the Bitcoin team - Ian Grigg and former Bitcoin developer Mike Hern, who earlier this year announced his resignation from Bitcoin and called him a failure before starting his new job.

Now, apparently, a revision of values ​​is coming. Banks that have left R3 are already working on their own blockchain projects, which once again indicates that the blockchain has not gone out of fashion at all. That is, the point here is that R3 was not able to provide them exactly the results they expected in terms of business or technology. Or the fact is that banks saw that they themselves could soon lose their former significance and are now trying to get their own piece of blockchain pie.

Complexity and efficiency

Bitcoin, being the first case of using blockchain in practice, has been around for 8 years. It has something completely new, wonderful: a form of money that works outside the existing structures of financial power, that is, banks and governments. Well, or rather, it is something almost new: we have every reason to say that Bitcoin is more like the earliest forms of money that went in circulation even before coinage appeared, rather than what we consider money today - related to banks, founded on debt electronic cash.

But for us, in any case, it seems something new, since money has been under the control of banks and governments for 2500 years.

Of course, you should be aware that from the inside, blockchains are very complicated. But if we talk about what Bitcoin is capable of from the point of view of an external observer, then here it immediately turns into a simple and open platform: anyone can use its network to transfer funds directly from one address to another.

Bitcoin offers the transfer of cash , just as if you were giving it personally from hand to hand, with the only difference being that this happens on the network. No one else is involved in this process. You do not owe anything to anyone. You do not need to attract someone else. There is no need for mutual trust. You just need to download the bitcoin client, or go to a web wallet like blockchain.info and make a transfer.

This is a quick, low-cost and unlimited way to move money . From the point of view of efficiency, there is a huge difference between it and the inherited banking systems operating on the basis of outdated infrastructure and imposing unnecessary costs and complications on you at almost every stage of operations.

In an era of zero or even negative interest rates, economic stagnation and increasing regulation, effective savings are becoming more and more attractive. Banks quickly saw the benefits of blockchain technology and are trying to start working with it as soon as possible. And this is one of the first reasons that led to the current problems of R3.

The growth of R3 from 9 initial members in September 2015 to more than 70 banks has been unprecedentedly fast for the banking sector at the moment. And this is not about branches, but about entire organizations. The quick and dynamic success of the R3 was probably his only problem.

Banks do not want to accurately reproduce Bitcoin. They want their own version of Bitcoin.

Bitcoin works on the principle that “everyone is responsible for how he deals with his money” and this scares many agencies. That is, in this process there is no one who would be at the head, and you no longer need to rely on intermediaries, proxies, banks or third parties to make transfers of personal funds.

No wonder banks don't like this idea. They want to preserve the most productive features of the blockchain, while at the same time introducing new features that bypass the elements of the new technology that are disadvantageous for them.

Bitcoin is an open or, in other words, uncontrolled blockchain. Therefore, the development of control layers on top of an open system that allows banks to intervene in its work is a key idea for interested representatives of the banking sector.

Such closed blockchains may be similar to their uncontrolled predecessors, but in reality they differ both in terms of values ​​and in terms of technology.

Adding a gatekeeper (bank), you, without any need, add a gate. First of all, the introduction of elements of control over the "chains" inevitably leads to an increase in security risks.

Without even considering the technological side of the issue, we can say that the simultaneous participation of 70 major players in the banking sector is more like a huge pack of pack leaders attacking one bone.

The irony is that attempts to domesticate blockchain technology for the sake of obtaining its effectiveness seem to end with the introduction of unnecessary complications and inefficient elements, both at the technological and organizational level.

In an interview with The RegisterGarrick Heilman of the Center for Alternative Finance at the University of Cambridge suggested that “although the meeting of many large banks under the auspices of R3 looked impressive, such a large number of members inevitably leads to organizational difficulties. “The fact that a very limited circle of companies took part in the development of test concepts for R3 did not go unnoticed.”

Therefore, some of the earlier members decided to leave the ship amid a ballooning consortium. Of particular interest is the departure of Goldman Sachs, one of the largest and most successful international investment banks. “The idea that such fiercely rival companies, each of which seeks to advance its own interests, will work together and in harmony to work on technology that enhances democracy and transparency, quite obviously, looks contradictory.”

Linux vs Windows

In a sense, this development is a reflection of the problems that all Bitcoin-based services have encountered in the last two years.

What is the revenue model for companies offering bitcoin wallet services? In a situation where, thanks to the features of Bitcoin, sending electronic money as such becomes fast and low-cost, adding commissions will not yield any useful results. Understanding this fact allowed Bitcoin companies to evolve quickly. New technology requires a new approach to generating income.

How are things going in the “mainstream” of the blockchain sector in this sense? In a sense, little has changed. All organizations that left R3 took up their own blockchain research (similar to what banks do), with the only difference being that they will now do it on their own. And even despite the fact that R3 will have to slightly reduce the amount of its financing, the consortium, behind which stands the full power of dozens of financial giants, everything will be fine, because this organization seems to have gathered some of the brightest minds in the world of blockchain.

However, this will be a good lesson for business, and an opportunity for open blockchain platforms of the old school.

For a number of reasons (in particular, slow development speed and reputation), Bitcoin will probably not fit into the formatthe coming wave of the further spread of the blockchain. But besides him, there are many other blockchain platforms and organizations that are rapidly advancing in the development of open protocols and offering the functionality necessary for most businesses.

The best of these platforms understand not only the needs of the business, but also the nature of the technologies they work with, and in particular the fact that introducing unnecessary complications is a bad idea both in a technical and organizational sense.

Many companies have significant financial resources. R3 plans to receive $ 150 million from its members. Blockchain platforms like Ethereum (smart contracts) and Waves(a blockchain platform for creating their own tokens) raised more than $ 15 million with crowdfunding, which can not be considered such a crazy feat against the achievements of some other startups that manage to get seven-figure sums.

These are small, start-up organizations that do not need to be held accountable to corporate shareholders and who are able to work in a limited budget. (The average monthly expenses of Waves, for example, are less than $ 100,000 per month).

Such platforms offer efficiency at all levels of activity: at the level of what they offer their users, in terms of their approach to development and in terms of organizing their workflow. In this regard, they embody the core values ​​of the blockchain. This attitude, however, does not always go well with the generally accepted approach to doing business.

To understand the challenges that traditional financial businesses face, the Linux analogy may be helpful. It is an open operating system developed free of charge by users and enthusiasts from around the world. However, it should be emphasized that Linux is not a hobby project.. In the segment of personal home use, its share does not exceed two percent, but when it comes to commercial applications, here it is used as the basis for a huge number of commercial applications, including in software for POS-terminals and the Android operating system.

In the case of servers and embedded systems, such as routers, smartphones, DVRs and similar devices, as well as industrial complexes, this operating system corrects the score. Linux adds incredible value to the business world without being sold as it is sold or licensed by Windows.

Linux is a lot like an open blockchain project. Businesses can take it and develop their own applications based on it. This is the nature of open source software. But getting direct profit from him is another matter. Not that it was impossible, but it is certainly not an easy task.

In fact, one of the strengths of Linux lies precisely in its open nature, allowing you to create a low-cost and secure platform that is accessible to all comers. It is well known that Linux was originally designed to be more secure.system, including at the level of user culture. Everyone can see his code base, as a result of which its shortcomings are discovered and corrected thanks to the efforts of thousands of users and developers around the world, as opposed to a small group of developers working on a closed code base on their own schedule - the Windows approach, otherwise briefly formulated as “Security through obscurity. " So blockchain chooses an open approach. Open platforms, including Bitcoin, are being severely tested by users before a new release is released. Sometimes being put on public display best helps to resolve sore problems.

The largest financial corporations, of course, will continue to develop their own blockchain solutions and their approaches will gradually reach new levels. But in parallel with this, new opportunities will arise in open blockchain platforms that are available to everyone for practical use and audit. And first of all, these users will be businesses, that is, ordinary representatives of the real sector of the economy, and not all the same financial giants that have always previously established the rules of the game.

The financial giants have just begun to master the blockchain and realize the benefits that it can bring (and which they can put in their pocket if they manage to control it). What, in the end, would prefer the big "bumps" - Windows or Linux?