Big businesses and blockchain

More recently, a consortium of R3 was like Nick Marshal - the hero Mel Gibson from the movie " What Women Want ." He was the blockchain alpha male, a gift from Wall Street for the technology of distributed registries. The company exuded confidence, being able to equally seduce both technical specialists and representatives of the financial industry. It seemed that the whole world was one solid gold vein lying at her feet. And after the alarm 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 not in any way be viewed as a kind of terrible omen for the consortium, but this event nevertheless returns us to the eternal mystery: what does business really need from suppliers of blockchain solutions?

Banks are running

A consortium of about 70 major players in the banking sector is a big thing. In such organizations are embodied a huge talent and influence. Blockchain has a lot to offer for the financial world and R3’s mission was to keep their promises.
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In late 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 for all this time. According to rumors, at the moment, a total of 7 banks want to leave the consortium.

The flagship project R3, called Corda, is a “distributed registry registry platform designed from scratch for recording, managing and synchronizing financial agreements between regulated financial institutions” and the registry at the confirmation stage of the KYC concept obviously does not meet the expectations of its partners. Kristof Bergmann from the profile news portal BTCManager made the following conclusion: “Both Corda and KYC-blockchain can be actual solutions for problems of the banking industry. However, as the last outflow of banks from the organization showed, none of the R3 projects, apparently, did not impress the big thing that everyone was waiting for. Perhaps the troika of [banks that had left the composition at that time] just realized that real innovations can rarely thrive in a consortium of reputable institutions, fenced from the rest of the world. ”

And although we do not know what is going on behind closed doors, it can be said for sure that if R3 does not end up in the thick of the impending battle for the blockchain soul, 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. He, in particular, managed to attract the best representatives of the Bitcoin team - Ian Grigg and former bitcoin developer Mike Hearn, who earlier this year publicly announced that he was leaving Bitcock and called him a failure, before starting his new job.

Now, apparently, revision of values ​​is coming. The banks that 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 the banks saw that they themselves could soon lose their former significance and are now trying to get their piece of blockchain pie.

Complexity and effectiveness

Bitcoin, being the first case of the use of the 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, this is something almost new: we have every reason to say that Bitcoin is more like the earliest forms of money that went into circulation before the appearance of minting, rather than what we consider today as money - related to banks. on duty electronic cash.

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

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

Bitcoin offers the transfer of cash , just as if you gave them personally from hand to hand, with the only difference that it happens on the network. No one else is involved in this process. You owe nothing to anyone. You do not need to involve anyone else. There is no need for mutual trust. You just need to download a bitcoin client, or go to a web wallet like blockchain.info and make a transfer.

This is a fast, low-cost and unlimited way to move money . In terms 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 the operations.

In an era of zero or even negative interest rates, economic stagnation and increasing regulation, effective savings become more and more attractive. Banks quickly saw the benefits of the blockchain technology and are trying to get to work 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 at the moment was unprecedentedly fast for the banking sector. And this is not about branches, but about entire organizations. The quick and dynamic success of the R3 probably turned out to be its only problem.

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

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

Not surprisingly, banks do not like this idea. They want to preserve the most productive features of the blockchain, while at the same time introducing new characteristics that bypass the unfavorable elements of the new technology.

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 interfere 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 fact they differ both in terms of values ​​and in terms of technology.

By adding a gatekeeper (bank), you, without any need, add a gate. First of all, the introduction of elements of control over “chains” inevitably leads to increased security risks.

Even without considering the technological side of the issue, it can be said that the simultaneous participation of 70 large players in the banking sector is more like a huge pack of pack leaders, lashing out on one bone.

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

In an interview with The Register , Garrick Hilman of the Center for Alternative Finance at Cambridge University suggested that “despite the fact that the meeting of many large banks under the auspices of R3 looked impressive, so many members inevitably lead to organizational difficulties. The fact that a very limited number of companies took part in the development of the R3 test concept did not go unnoticed. ”

Therefore, some of the earlier members decided to leave the ship in a ballooning consortium. Particularly interesting care Goldman Sachs - one of the largest and most successful international investment banks. “The idea that so vehemently rival companies, each of which seeks to promote their own interests, will work together in harmony 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 faced in the past two years.

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

How are things going in the blockchain-sector mainstream in this sense? In a sense, little has changed. All organizations that left R3 did their own research on the blockchain (similar to what banks do), with the only difference being that now they will do it themselves. And even despite the fact that R3 will have to slightly reduce the size of its financing, the consortium, which has all the power of dozens of financial giants behind it, will be all right because this organization seems to have gathered some of the brightest minds in the world of the 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, the slow development speed and reputation), Bitcoin will probably not fit into the format of the upcoming wave of the further distribution of the blockchain. But besides him, there are many other blockchain platforms and organizations that are rapidly moving towards the development of open protocols and offering the functionality that most businesses need.

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 the introduction of unnecessary complications is a bad idea in both technical and organizational terms.

Many companies have substantial financial resources. R3 plans to get $ 150 million from its members. Platform blockchains such as Ethereum (smart contracts) and Waves (blockchain platform to create your own tokens) have attracted more than $ 15 million in crowdfunding, which cannot be considered such a futile feat against the background of 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 know how to work in a limited budget. (Waves' average monthly expenses, for example, are less than 100 thousand dollars a month).

Such platforms offer efficiency at all levels of activity: at the level of what they offer their users, in terms of approach to development and in terms of organization of the workflow. In this regard, they represent the basic values ​​of the blockchain. Such an attitude, however, is not always well combined with the generally accepted approach to business.

To understand the challenges that traditional financial businesses face, an analogy with Linux can be useful. It is an open source operating system developed by free 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 rules the ball. Linux adds incredible value to the business world, while not selling as Windows is selling or licensing.

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

In fact, one of the strengths of Linux lies precisely in its open nature, which allows you to create a low-cost and secure platform that is accessible to all comers. It is well known that Linux was originally designed as a more secure system, including at the user culture level. Everyone can see its code base, as a result of which its flaws 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 vagueness. So the blockchain chooses an open approach. Open platforms, including Bitcoin, are severely tested by users before a new release is released. Sometimes putting it on public display helps best to solve 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 also arise for open blockchain platforms that are accessible to everyone for practical use and auditing. And above all, such users will be businesses, that is, ordinary representatives of the real sector of the economy, and not all the same financial giants who previously always established the rules of the game.

Financial giants have just begun to master the blockchain and realize the benefits it can bring (and which they can put in their pockets if they manage to control it). What ultimately prefer the big "bumps" - Windows or Linux?