Given how popular it has become to implement blockchain technologies into new and innovative projects that aim to digitalize more aspects of our day-to-day lives, it was only a matter of time before we got news of current economic giants opening their way into this market.
With a market capitalization of $133 billion USD, cryptocurrency is the most profitable and widespread application of blockchain, with their main selling point being the possibility of decentralized and completely secure transactions and savings.
Despite this being very far from the big leagues, as it’s highly surpassed by other technologic names (Apple with $1 trillion) and renown financial organizations (JPMorgan Chase with $345.44 billion, Bank of America with $278.53 billion), the growth rate in this metric and in trading volume makes cryptocurrency a topic worthy of attention. And recently, some of these heavyweights have announced their projects to disrupt into the market.
On December 2018, Bloomberg reported that Facebook, the social media with most users in the world, had plans to develop their own stablecoin to allow users of Whatsapp, a messaging app they bought back in 2014, to perform transactions via text messages. The reports were later confirmed to be true, and more details of the project are now public.
As soon as you read this, the memories of failed projects like Facebook Credits and Facebook Gifts should come to mind (both closed two years after launch). And coupling that with the recent scandals involving Facebook’s management of their users’ data and privacy breaches only raises more questions about trusting them with money and potential international transactions.
Of course, the fact that Whatsapp already encrypts all the messages sent through them, and that Facebook’s coin will be implemented via blockchain give the idea an additional notion of security. But then even more doubts arise: will it be a centralized or decentralized coin? How can they ensure the usability of the coin in different countries?
All these questions just leave the userbase with a huge sense of distrust, and it’s up to Facebook to prove that they can be trusted with international transactions (more importantly, remittances). And if there’s a company that could use their massive name, recognition and influence to ally with different exchanges and businesses to increase their reach around the world, it may be Facebook.
The banking powerhouse has already developed their own token, the JPM Coin, and is currently in their test stage, restricted to institutional clients for business-to-business transactions. They claim that the cost reductions for the institutions would eventually be beneficial for their individual clients, but do not discard the possibility of releasing the token for private use in the future.
If Facebook’s token must face public backlash due to privacy and security issues, JPMorgan will have to deal with a completely different topic: centralization. The fact that cryptocurrencies are specifically made to counter the meddling of banking corporations into transactions, giving people complete freedom to move their money as they please, makes it contradictory that a bank would be developing one, and on their own private blockchain, moreover.
The crypto-savvy users would be discouraged to use the token if they know that all their transactions pass through the database of the largest bank in the world, but there would be a sense of trust by having a controlled and measured process for emitting new coins, unlike what’s happening with tokens like Tether (which refuse to be audited to confirm they are properly linked to an asset).
On the other hand, this can work as a potential introduction to the cryptocurrency market for both institutions and their clients, while also relying on their trust towards making transactions without any tangible assets on the table (even though the emission of coins requires a personal deposit in one of the bank’s offices).
This certainly seems like the perfect field test for a potential merge of traditional finances and banking with the ever-growing world of cryptocurrency trading, which can either set a precedent for future finance companies or mark the division even more. We will probably see the result of JPMorgan’s experiment later this year.
One of the most recent announcements regarding companies setting sail into the sea of blockchain is that PayPal, the online payments giant, joined a funding round for a data managing startup via distributed ledger called Cambridge Blockchain. It’s still unknown how much did PayPal invest into the Massachusetts-based project, but the number might be near to $3.5 million.
Matthew Commons, Cambridge Blockchain’s CEO, has spoken in interviews about the collaboration with the payment platform, and has said that the fact of them being localized in Luxembourg, where PayPal has a major presence, might have worked in favor of the deal.
But it’s certain that the focus of PayPal is to help Cambridge Blockchain further develop their data management technologies, which may be of great use for the platform given the huge number of accounts they manage and that these accounts also hold financial information and are used to make transactions. Transferring the accounts to a distributed ledger could be very helpful towards maintaining the security of their users’ data.
IBM has been working in the blockchain landscape for a few years now, with a reported amount of 1,500 employees in their blockchain division, which is better known by their contributions in developing the Hyperledger Fabric for the projects run by the Linux Foundation to work on.
Also using the Hyperledger Fabric, they release a Blockchain-as-a-Service (BaaS) platform in 2017 for companies to set up trusted, safe networks where they can internally share information.
Recently, IBM entered a partnership with Stellar to power their World Wire platform, which has a similar purpose to the JPM Coin, but Jesse Lund, director of IBM Blockchain, has said “World Wire seeks to do is provide fungibility of digital assets across financial institutions”.
Microsoft has already made several moves into blockchain, including filing patents for TEEs (Trusted Execution Environments) and releasing developer tools for creating DLTs that run on their Azure Blockchain Workbench, that give the impression of them being seriously interested in letting this technology thrive.
On top of that, the company is trying to implement a royalty and copyrights blockchain for Xbox, which can bring great benefits to game publishers when they must define legal terms. This project is being tackled in partnership with Ernst and Young, one of the biggest firms in professional services in the world.
Also, Microsoft has openly declared their support for the ID2020 initiative, which focuses on using blockchain solutions to aid the 1.1 billion people in the world that don’t possess any form of legal identification.
As more big companies publicly announce their efforts into implementing blockchain technologies to satisfy different necessities, the usefulness of the technology becomes clearer, and more users become aware of how they can get some benefits from it, and that’s the logical step we need to take to make the most out of blockchain.