Balaji S. Srinivasan, CTO of Coinbase, has stated that the banking movement of private blockchains is arguably overrated. Speaking at EthSanFrancisco, Srinivasan said:
“I always respect folks who are working hard and respect entrepreneurs, and so on. I do think that the whole banking movement of blockchain not bitcoin, private blockchain and so on, is arguably overrated.
The reason is I think a blockchain without a native digital asset is something which, you know you’ll lose a lot of the benefits of a blockchain I believe.
I think private blockchains may have a V.2 where people realize: hey I’ll do like a private ICO where it’ll be set-up like a joint venture where you have ten companies in a consortium, but they have actually a percentage of the token.
Then it might actually work again, but I think the whole concept of blockchain without bitcoin was a dead end.”
The blockchain part of bitcoin was always seen as an interesting aspect, but it was not until 2014-2015 that it started being seen as not necessarily related to the cryptocurrency component.
Blythe Masters, a former executive at JP Morgan, begun arguing at that time that the most valuable aspect of bitcoin is the blockchain, and that the blockchain can be a stand-alone technology that can be incorporated into all sorts of functions.
That idea grew in 2016 and then exploded in 2017 in part because of ethereum’s smart contracts technology. Pretty much all household brands then started implementing blockchain tech and some of them are now going into production.
Srinivasan is arguing the blockchain needs a token of sorts, without elaborating further. Presumably he has in mind monetary incentives which then make it difficult to change the database, or maybe he is thinking the easy transferability of the token component is the most important part.
Regardless, his focus appears to be limited to private blockchains within the banking industry, while private blockchains have now expanded considerably to many industries rather than just banking.
The general idea has been for the private blockchains to be a sort of intranet which then connects to the public blockchain.
That private blockchains are a sort of safe experimenting environment where different things can be tried with training wheels on, then that knowledge can be transported to the far more secure public blockchain.
In addition, some are arguing that private blockchains are useful for co-ordination between many parties which might be trusted, but still might have say a rogue employee.
Balaji for example says that off-chain is underrated. That most aspects should be kept on a centralized database like postgres, with only the most important aspects connecting to the blockchain.
One could expand that, for some use cases, to argue that most aspects can be kept on a private blockchain where there is a more trusted coordinating environment, and then that can connect to the public blockchain for the most important aspects.
An evolution in private blockchains is however probable as much of this space continues to innovate, with the awareness of capabilities and limits continuing to expand. So it isn’t clear at this stage whether Balaji is right, or the many private blockchain backers, like IBM.