have already started implementing the technology, putting them ahead of other sectors, said Michael Adam, the founder of Milwaukee-based companies DocLaunch and BankMyBiz. (DocLaunch, the younger of the two firms, plans to launch its blockchain-based software for managing financial documents later this month.)
Adam said that some of the largest banks in the world have begun creating their own blockchains and forming multi-company blockchain consortiums, such as the one led by R3 CEV. JPMorgan Chase (NYSE: [[ticker:JPM]]), like R3 based in New York, left the consortium earlier this year and last month Jamie Dimon, the bank’s chairman and CEO, reportedly called people who buy bitcoin “stupid.” Block, the DePaul professor, said Thursday he feels Dimon’s comments were “ironic” because JPMorgan is building a private blockchain based on Ethereum, a digital currency similar to Bitcoin.
So if even a bank led by a Bitcoin-bashing executive appears to see promise in blockchain, what stands in the way of the technology becoming more widespread? One challenge is ensuring that there’s sufficient processing power across the worldwide blockchain network to manage the growing volume of data stored related to these transactions. According to a Goldman Sachs (NYSE: [[ticker:GS]]) report published in June, the most established blockchains, such as the one used to track Bitcoin payments, can currently process five to eight transactions per second. Many popular credit card networks can process about ten thousand times that many transactions in a second, according to the report.
Bob Cornell, lead emerging technology analyst at Milwaukee-based Northwestern Mutual, said “transactional throughput” hinders many blockchain-based systems today. However, he pointed to Plasma, a concept Ethereum co-founder Vitalik Buterin helped introduce in August, as a potential remedy. Part of the idea with Plasma is to move certain data into “child” blockchains controlled by a parent chain, which “can allow for incredibly scalable, low-cost transactions, and computation,” Buterin and co-author Joseph Poon wrote in their paper on Plasma.
Cornell said that with Plasma, blockchain networks could “go from a reduced capability mode versus a Visa transaction network, [for example], to something that is potentially able to handle far more [volume] than the established networks out there.”
Right now, there’s a fair amount of “frothiness” when it comes to blockchain and digital currencies, particularly with the initial coin offerings companies have increasingly been using to raise money, said Derek Urben. He’s the chief financial officer of Coinigy, a Milwaukee-based startup that develops tools for trading on the exchanges that allow users to change U.S. dollars and other fiat currencies for digital currencies.
More people and organizations—everyone from institutional investors to recreational traders—are engaging with digital currencies and other blockchain technologies. Despite the flood of new entrants, Urben said he believes that over time, the companies that will emerge as the biggest winners are already active today—even if they’re not making much noise at the moment.
“I do think there are [future] Amazons and Googles and Facebooks that are in this space already,” Urben said. “They’re already here, but I don’t think anybody knows what they are.”
