As the debate over the long-term viability of bitcoin continues to swirl, major financial brands are investigating in the technology including NASDAQ, Barclays and MasterCard—the latter investing last year in bitcoin company Digital Currency Group (DCG).
Blockchain, the technology behind bitcoin, uses sophisticated cryptography and distributed ledgers to regulate, record and enable bit coin transactions. According to Business Insider, blockchain “has the potential to strip out huge amounts of administrative costs, and companies around the globe are signing up to get a piece of the action through consortiums and direct investment.”
Garry Lyons, MasterCard’s chief innovation officer, told Business Insider, “Like the rest of the world, we’re interested in seeing where blockchain technology goes, and that’s why we invested in DCG. It’s connected to 15 different others and they have their fingers in the right pies, so we’ve got the right engagement right now to see people experimenting with the underlying tech.”
It’s not just the industry that’s excited about blockchain. “It’s the world, everyone,” continued Lyons. “Even at Davos, every single tech panel I have gone to mentions blockchain, and some people call it the second coming. But while we think it’s very interesting, we don’t want to, and no one wants to, be blindsided by rushing into it.”
The rush is causing predictions of bitcoin’s imminent demise as well as its meteoric potential—with blockchain consortium R3 announcing that 11 major investment banks had made trades on an open-source alternative to bitcoin, according to International Business Times.
Lyons commented, “R3 is an interesting way of doing that because it brings several interested parties together to experiment with underlying tech. It’s a good opportunity for the banks, and there’s more chance of blockchain technology succeeding as a group than disparate parties.”
Meanwhile, bitcoin took a dive last week, losing 13 percent of its value to settle at below $365 for the first time since early December 2015 as news that Mike Hearn, a core developer of the software, was quitting and pronouncing bitcoin a failure.
Hearn’s frustration over scaling the cryptocurrency and rejection of his proposed Bitcoin XT, a version of the bitcoin core but with bigger blocks for more transactions, led to his departure. “From the start, I’ve always said the same thing: Bitcoin is an experiment and like all experiments, it can fail,” said Hearn in Venture Beat. “The now inescapable conclusion that it has failed still saddens me greatly.”
“To paraphrase Mark Twain, it would seem that reports of Bitcoin’s death are greatly exaggerated,” counters Nasdaq.com. “The network faces a huge challenge in the near future as a solution to continuing increases in popularity must be found, but that is in many ways a wonderful problem to have.”
TechCrunch noted that bitcoin is unregulated and provides anonymity, so it rapidly became a haven for drug dealers and anarchists. “Its price fluctuated wildly, allowing for crazy speculation. And, with the majority of Bitcoin being owned by the small group that started promoting it, it has been compared to a Ponzi scheme.”
In addition, the bitcoin network can process only a handful of transactions per second, reports TechCrunch, resulting in unpredictable transaction-resolution times and fees that exceed credit-card fees at peak times.
“In the beginning, Bitcoin was a noble experiment,” concludes TechCrunch. “Now, it is a distraction. It’s time to build more rational, transparent, robust, accountable systems of governance to pave the way to a more prosperous future for everyone.”
Enter block chain—perhaps the second coming, perhaps not.
