March 22, 2016
The evolution of bitcoin’ public blockchain will usher in resilient, ubiquitous online marketplaces that won’t need intermediaries at all.
Just as the dawn of the public Internet era saw the adoption of TCP/IP-based secure, private intranets within corporate firewalls, the public blockchain era is spawning private versions. Just as there is a place for the public Internet and private intranets, PwC believes there is a place for both private and public blockchains, including combinations of the two.
For banks and other financial institutions under enormous pressures to change quickly, 2015 was a year of forecasting and planning next steps for private blockchains of all kinds. Using blockchain technology to reengineer transactions, contracting, and other digital business flows is a huge challenge that will take years. By the 2020s, many enterprises outside banking and financial services may well have adopted private blockchains for various digital business flows. (But see the list of obstacles to adoption here.)
“Every company will have its own version of a blockchain, probably hundreds within a company, one for each application it has,” Hu Liang, senior managing director for the emerging technologies center at State Street, says in an interview with PwC. “We think there will be hundreds if not thousands of blockchains.”
Outside the established banking industry, legions of developers are focused on public blockchains. They’re lined up on the border between land that has already been parceled out and unexplored territory, awaiting the signal for a financial services land rush. To their minds, public infrastructure that is open to worldwide scrutiny will win the day for the same reason that cryptographic algorithms that were open to public inspection won instead of secret protocols years ago—more scrutiny by as many experts as possible results in stronger technology.1 They assume that the evolution of bitcoin’s public blockchain will usher in resilient, ubiquitous online marketplaces that won’t need intermediaries at all.
These developers are betting on nothing less than the financial transaction equivalent of the public Internet to emerge. That’s the vision of OpenBazaar, an open peer-to-peer marketplace launched in December 2015. “Instead of visiting a website,” OpenBazaar says in its FAQ, “you download and install a program on your computer that directly connects you to other people looking to buy and sell goods and services with you. This peer-to-peer network isn’t controlled by any company or organization—it’s a community of people who want to engage in trade directly with each other.”
OpenBazaar is just one example of dozens of initiatives that seek to leapfrog already disruptive peer-to-peer marketplace services that have existed for nearly a decade now. Some observers are looking beyond individual open-source efforts, such as OpenBazaar or the Ethereum protocol, to a dynamic open marketplace that could have its own momentum and outpace any bank reengineering efforts. On the face of it, decentralized networks and decentralized developer communities would seem to be symbiotic.
Commenting on OpenBazaar’s launch, entrepreneur and blockchain influencer William Mougayar said, “Who owns the network now? Everybody and nobody. The network is in the wild.” Many, including PwC, foresee a blending of public and private blockchains.
Blockchain technology is embeddable and can be subsumed by larger systems, and it’s best to think of blockchains in terms of what will eventually surround them. They will not stand alone, but will function within the core of multiple, increasingly distributed ecosystems.