When Balaji Srinivasan talks, people listen. As a co-founder of 21 Inc., the company that has raised more money in the cryptocurrency space than any, Srinivasan naturally gains attention when he talks about cryptocurrency’s future. He recently set off a volley of engaging comments when he tweeted about one of the most contentious cryptocurrency topics – private blockchain consortiums.
Srinivasan tweeted that consortiums could be the limiting blockchain adoption since one of their primary purposes is to bring normally distrusting actors together.
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Private Blockchain Challenges
Private blockchains make more sense among parties that are less trusting of each other, he tweeted, but this makes gaining buy-in more time consuming. He compared it to passing an international treaty.
While 21 Inc.’s focus is in supporting bitcoin development, the company has some stake in the growth of private blockchains, which is where much of the current institutional investment is flowing.
Srinivasan said he thought everyone would share his enthusiasm for different business applications. He has realized getting buy-in for a private blockchain from different businesses takes time since they have to recognize the concept’s value, and they have to agree to use the same software. He believes the market will eventually support the concept.
Srinivasan said selling a private blockchain requires surviving a long sales cycle, which can be difficult. He said it will be easier for consortiums to agree on an open source private blockchain than a for-profit option. He referred to pure open source blockchains as “demilitarized zones.”
Twitter Dialogue Commences
One respondent noted that banking consortiums played a key role in DTCC, MasterCard, VISA and Swift.
Another noted that systems integration will prove to be a limiting factor.
Still another person pointed out that government could play an important role in private blockchain development.
The main reason that financial institution consortiums have proven controversial is they are seen as trying to use private blockchains to control cryptocurrency.
Distrust For Consortiums
Overstock.com CEO Patrick Byrne recently warned that the private R3 consortium is looking to outlaw competition, CCN reported. He alleged that Wall Street is coming together to ensure that their version of the blockchain is the only one that will matter, in a regulatory way, in the future.
The way in which Wall Street moves ahead at this point could have a profound influence of whether blockchain takes hold in finance.
What 21 Inc. Brings
21 Inc., a small Linux computer that has the bitcoin protocol as part of its operating system, set a startup funding record when it secured $116 million in venture capital not just as a Bitcoin startup, but for any bitcoin company in the technology’s six-plus years.
The name 21 Inc. comes from the 21 million bitcoins that will be produced in total by the year 2140, once all bitcoin blocks have been successfully mined.
Major players affiliated with 21 Inc. include Peter Thiel and Max Levchin, co-founders of PayPal; Andreessen Horowitz; RRE Ventures; Qualcomm Inc.; Dropbox Inc. CEO Drew Houston; Zynga Inc. co-founder Mark Pincus; Expedia Inc. CEO Dara Khosrowshahi; and eBay Inc. co-founder Jeff Skoll. Cisco Systems Inc. and Mark Templeton became investors last year while former U.S. Treasury Secretary Lawrence H. Summers joined the advisory board.
Srinivasan, a partner at Andreessen Horowitz, compares 21’s work in building bitcoin products for the general public to the early development of 56-KB Internet modems, international fiber cables, and wireless Internet towers. Such innovations were integral in the mass adoption of the Internet, and 21 Inc. looks to follow the Internet’s growth model.
21 Inc. last May released plans for a mining chip called 21 BitShare, CCN reported. The chip enables consumer devices such as smartphones to mine bitcoin while receiving small distributions from a managed pool of bitcoin earnings. The model could facilitate a new form of digital commerce and interconnectivity.
In February, the company launched a free web application to help bitcoin users determine the fee required to confirm a transaction in a given amount of time.
Images from Shutterstock and LinkedIn.