The Newest Bank Blockchain: Will This Be the Breakthrough?
February 28 2017 - 3:02PM
Dow Jones News
By Paul Vigna
A new consortium of banks and tech giants was set to announce
its formation Tuesday, the latest stab at expanding open-ledger
"blockchain" technology that could shave billions off the cost of
basic Wall Street functions.
The latest project, which was to be unveiled in Brooklyn, is
called the Enterprise Ethereum Alliance. The nonprofit foundation,
which includes J.P. Morgan Chase & Co., Microsoft Corp., Bank
of New York Mellon Corp., Intel Corp. and Banco Santander SA, shows
the fight is continuing to develop the killer back-office app in
finance, despite increased focus since last year's election on
revenue growth.
So far, there has been more hype than tangible progress on
blockchain at banks. The group announcing itself this week is
building a platform based on an open-source software project J.P.
Morgan started last year called Quorum, which aims to eliminate the
need for a costly infrastructure of middlemen and third parties
overseeing transactions.
Quorum uses the core concepts behind blockchain, the open-ledger
technology that underpins the digital currency bitcoin. But it is
based on Ethereum, an alternative version of bitcoin.
Blockchains have been appealing to banks because they are
networks of connected computers sharing the same database and
record-keeping. That eliminates costs, but raises questions about
how banks would handle proprietary information on such a
transparent ledger.
The Ethereum Enterprise Alliance expects to launch a working
version of its protocol, called EntEth 1.0, this year, and will be
inviting developers to help build it out and build products on it.
The goal is to create an open, flexible platform that would at the
same time preserve some privacy for banks.
The alliance is a sign that the race to build out this
technology on a large scale is heating up again. There have been a
number of attempts over the past two years, but none have yet
produced a working version. Many of the banks involved have more
than one iron in the fire, in fact. J.P. Morgan, for example, is
also a shareholder in startups Digital Asset Holdings LLC and
Axoni, and also has some of its top coders working on Quorum.
Whichever group gets there first, a working blockchain-based
network would be a big advantage for the financial-services
industry. In January, the consulting firm Accenture, which also is
part of the alliance, estimated that eight of the world's largest
investment banks could realize an average of $10 billion in annual
cost savings, by 2025, assuming blockchain technology reaches
widespread use.
--Telis Demos contributed this article.
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
February 28, 2017 14:47 ET (19:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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