The Economist recently featured Bitcoin and blockchain technology on the cover of their October 31st issue, and the weekly newspaper also released a video of a panel discussion on the topic via their YouTube channel. SecondMarket Founder and Digital Currency Group CEO Barry Silbert was featured on the panel, and he was given the task of defending the Bitcoin blockchain against all of the new private, permissioned blockchains that many fintech startups and banks seem to be in love with right now. At one point during the conversation, Silbert was asked for his specific thoughts on the possibility of success for non-public blockchains, and he didn’t have many kind words to share on the concept.
Regulation and Getting Banks to Work Together
During his initial remarks on the idea of a permissioned, bank-approved blockchain, Barry Silbert was rather blunt. He stated:
“I think they’re going to fail, and I think, ultimately, the people working on these projects at the banks are going to end up leaving the banks to work at startups that are building it outside.”
Getting more specific, Silbert pointed to current financial regulations and the inability for banks to work together as a reason for the future failure for this concept:
“Ultimately, it’s very difficult to drive innovation in a bank today, given the oversight and the regulation. The idea of getting two banks together — let alone ten or twenty in a room — I mean, it makes my head hurt just trying to schedule the meeting.”
Banks are Too Slow
One portion of Silbert’s comments that won’t find many detracting voices is when he talked about how it can take banks years to put out new products or services, even when they aren’t as complex as a blockchain. In Silbert’s view, the inability for banks to put something together quickly will allow any current issues with Bitcoin’s security or scalability to be solved. He explained:
“There’s a lot of talk; there’s a lot of interest, but anybody who has worked on systems at banks can tell you it takes two years to deploy any basic system. So, we’re five [to] ten years out from any of these efforts actually turning into a product that can be used, and while that’s happening, it is my belief that the Bitcoin blockchain is going to address a lot of the issues that were mentioned before around security and scalability. Ultimately, the innovation that’s going to happen, which will be adopted by the banks, is going to be done outside of the banks.”
Still Happy to See Banks Interested in Blockchain Technology
Although Silbert is not bullish on banks creating their own blockchains, he does view the financial industry’s interest in Bitcoin and blockchain technology as a net-positive. He noted:
“I think it’s great that they’re doing it. I think it’s fantastic that the narrative over the past twelve months has changed from [tulip bubble or ponzi scheme] to recognizing it’s a very, very powerful technology, but we just need to look at the history of technology on Wall Street and it’s just — innovation doesn’t come from the banks on Wall Street.”
Many other notable Bitcoin entrepreneurs and investors, such as Xapo CEO Wences Casares and ShapeShift.io CEO Erik Voorhees, have argued that private, permissioned blockchains are nothing more than private databases, which is a technology that has existed for many years.
Whether or not a blockchain is supposed to be permissionless is an argument that will be settled in due time, as practically every major bank in the world is now looking at how they can use blockchain technology to cut costs and improve financial services for their customers. For now, Bitcoin is still the one blockchain that rules them all.