This Blockchain Startup CEO Doesn’t Think Bitcoin is Going Away

Over the past year or two, large financial institutions and tech companies have taken a liking to Bitcoin’s underlying blockchain technology. Many bank executives, such as JPMorgan Chase CEO Jami Dimon, were initially dismissive of Bitcoin entirely, but they now see value in the some aspects of the technology first released by Satoshi Nakamoto in January of 2009.

Chain is one of many startups working with the likes of Visa, Nasdaq, Capital One, and other major financial institutions to see where this technology can provide value, and CEO Adam Ludwin recently talked about this relatively new area of fintech with angel investor Jason Calacanis.

While Calacanis outlined the perceived demise of Bitcoin and rise of blockchain technology in the introduction to his interview with Ludwin, the Chain CEO shared his belief that Bitcoin won’t ever go away.

Learning About What People Need

When Chain first launched in April of 2014, their first product was a Bitcoin API. “Developers were kind of rushing into the space saying, ‘We want to just figure this out and build interesting things,’” said Ludwin. “But there was no platform for them to do that. There was no Twilio. There was no Stripe. There was no developer-friendly way to get an app up, running, and connected to the Bitcoin network.”

According to Ludwin, roughly a third of all Bitcoin apps and services were built on top of Chain’s Bitcoin API just a few months later.

By August of that year, Nasdaq, Fidelity, and FirstData were knocking on Chain’s door to learn more about Bitcoin. Ludwin provided potential use cases of Bitcoin for each of those companies during their meetings, but those financial institutions were not hearing demands for Bitcoin-related services from their customers.

“The message I got back from those three meetings and subsequent meetings was always the same,” said Ludwin. “It was: ‘Can you please explain to us, one more time, how the heck you’re sending money from your phone to Wikipedia or back to your office in San Francisco?’”

“They couldn’t understand how this was happening . . . I needed to explain this in a way they could understand but also grok that there was something fundamentally new here,” Ludwin added.

Ludwin ended up describing Bitcoin as a solution to the double-spending problem, which is often declared to be its most vital feature. The financial entities responded by asking Chain to help them make securities trading, payments, and other asset transfers work in a manner similar to the movement of bitcoins on the Bitcoin blockchain. “That’s what really set us on the path to what we do now,” said Ludwin.

Why Bitcoin Won’t Go Away

After explaining that financial institutions were interested in solutions to real-world problems rather than Bitcoin specifically, Ludwin compared Bitcoin to BitTorrent. “It’s never going away,” he claimed.

“People who are either off-the-grid or want to be off-the-grid are going to use it, and that’s what people are using it for today,” Ludwin added.

Ludwin then provided a “morally righteous” use case for Bitcoin in which a political dissident is able to make a donation to a cause or group that their local government may want to block. Calacanis added that Bitcoin is for the types of use cases seen acclaimed television series Mr. Robot. “You want to buy something on the Internet that you don’t want showing up on your card statement — that’s really what most Bitcoin activity today is about, outside of the speculation,” continued Ludwin.

The Tradeoffs of Open Blockchains

Near the middle point of the interview, Ludwin explained the recent hard fork of Ethereum, which resulted in two, distinct blockchains. He used the recent split in the Ethereum community as an example of some of the drawbacks of these open, permissionless blockchains.

“A lot of people have been telling financial services businesses that you got to get on board with Bitcoin, you got to get on board with Ethereum, or you got to get on board with these open networks,” said Ludwin. “They’re never going to put their customer money or client money on a network that requires a political process that can have factions and have bank money sitting on potentially two or three networks. It’s not going to happen.”

Ironically, Santander announced they are working on that sort of functionality on top of the Ethereum blockchain at Devcon Two. Having said that, reports indicate there may still be some regulatory hurdles ahead. In the past, Estonia’s largest bank, LHV, has issued various types of assets on top of the Bitcoin blockchain with the help of ChromaWay. The Central Bank of Barbados is also allowing Bitt to issue Barbados digital dollars on top of the Bitcoin blockchain.

With Chain, Ludwin is hoping to help financial institutions avoid some of the downsides of open blockchains by creating permissioned ledgers. Ludwin also stated these new systems will also have their own tradeoffs. “We’re going to explicitly allow [financial institutions] to set the rules for this network,” he said.

In other words, those Mr. Robot-esque use cases Calacanis mentioned may not be viable on permissioned ledgers.