Separating blockchain's benefits from cryptocurrency misses the full story

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Like a lot of banks, JPMorgan Chase has taken a tepid approach to blockchain, saying its meaningful impact is years away and will mostly impact trade finance.

Yet, JPMorgan has a far-from-uniform position on blockchain. It has been publicly enthusiastic about the technology, even leading an Ethereum-backed interbank information network.

Crucially, it has tried to separate the promise of blockchain from the use of cryptocurrencies, and limit global expectations of how blockchain might change our world. In this, however, the finance giant misunderstands a number of aspects about blockchain’s future.
It is true that the currently prevailing generation of blockchain protocols will not supplant global payment systems. The growing pains of these chains—their security hiccups, their slow transaction speeds, their (relatively) high transaction costs—all reasonably lead traditional financial analysis to believe that blockchains will not be able to reach the standards of today’s enterprise solutions.

Crucially, this neglects the improvements on the horizon. There are upcoming projects that can securely reach the speeds that bitcoin and ethereum lack. The cutting edge of our industry stands at seven to 15 transactions per second (tps), and so it makes sense for JPMorgan to believe that blockchains will only provide slow, marginal improvements to trade finance. But chains like Cypherium are soon to make 2,500-5,000 tps a standard of the space, outperforming the legacy systems of Visa and Mastercard. Once these innovations become recognized as the standard of the space, they will certainly change most mobile financial systems.

Moreover, JPMorgan might think of blockchain as “mostly [impacting] trade finance” because trade finance is that firm’s cottage industry. This false insight betrays an analysis made in the self-image of the firm. In fact, trade finance is hardly the focus of most developers in the blockchain universe. It is certainly an important use case, but it is one of many.

Blockchain will prove to be as varied as the internet itself. Different chains will be able to perform different actions according to the needs of its users. There will be high throughput like ours that use small blocks like the small data packets of TCP/IP, but there will always be projects like bitcoin or Qtum focused on large-scale computing consolidation.

There is a fundamental irony in the “blockchain, not crypto” position espoused by traditional financiers and business professionals. They encourage those entering the space to widen their view of these new protocols beyond their speculative monetary values in favor of real-world use cases of the technology.

In doing so, however, they limit their definition of blockchains to cryptocurrencies, or decentralized monetary mechanisms — ledgers that hold and track asset values. Certainly, this is a central aspect of the technology, and we must not underestimate the effect that decentralized ledgers will have on the financial world and its many, complex mechanisms.

But that is hardly the full picture. When major institutions like JPMorgan Chase fully embrace the potential of both blockchain and crypto, particularly when they work in tandem, we can expect to see the most lasting change.

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