There have been two announcements by major global companies in the past week that could see 2019 as being the year blockchain goes mainstream.
JP Morgan announces ‘JPM Coin’
Last week JP Morgan announced plans to launch its own blockchain to speed up transaction times for the many thousands of international transactions it facilitates for its corporate clients, securities transactions and treasury services.
There are some important things to note about the announcement:
- This blockchain will be private and permissioned. JP Morgan will have centralised control over the blockchain and users must be approved by JP Morgan. This is a significant distinction from the decentralised and permission-free blockchains we know such as Bitcoin and Ethereum, which operate on public networks that anyone can join freely. In some ways this makes sense — JP Morgan already knows who its clients are and will be the facilitator of every transaction, so there’s no need for anonymity or to open up the network to the public. However, it may restrict future use cases and prevent global adoption.
- The cryptocurrency that will be used to facilitate transactions — dubbed ‘JPM Coin’ — will be pegged 1:1 against the USD. Again, a significant distinction from most traditional cryptocurrencies whose price is freely determined by market forces. However, this is critical to JPM Coin’s primary use case — facilitating faster cross-border transactions. It would be a pointless exercise to speed up transaction times if the technology exposed clients to wild price fluctuations, which could cause clients to lose a significant amount of money on a simple funds transfer.
Why does this matter?
In and of itself, the announcement is not groundbreaking. The blockchain is nothing more than a prototype and there have been plenty of blockchain-based initiatives launched by banks in the past which have been sidelined (Morgan Stanley’s Bitcoin trading desk) or abandoned altogether (Citibank’s Citicoin).
What’s important is the message this sends to the wider banking and financial industry. This move could force other major financial institutions to take blockchain technology seriously and potentially develop their own blockchain-based networks and fiat-backed tokens.
While several banks have set up research initiatives in collaboration with each other to explore the potential use-cases of blockchain technology in the industry, JP Morgan’s public announcement has put a spotlight on the technology, effectively backing it as the future of banking.
“With our fortress balance sheet, expertise in blockchain and global payments network, J.P. Morgan can seamlessly and securely transfer and settle money for clients around the world.” — JP Morgan
JP Morgan is the US’ largest bank and now has first-mover advantage in what will surely become a hotly contested space.
Samsung launches the S10, with built-in cryptocurrency wallet
This is a move which I have been anticipating for some time. With global mobile payments expected to reach $1 trillion in 2019 and mobile payment penetration reaching one third of all internet users, it only makes sense that if cryptocurrencies are the future of money, than phones are the future of wallets.
Yesterday at Samsung’s ‘Unpacked’ event, it announced that its new S10 will feature Knox — a private key storage and all-in-one blockchain platform. Put simply, Knox is a cryptocurrency wallet allowing users to securely store their private keys for transacting on blockchains.
“Galaxy S10 is built with defense-grade Samsung Knox, as well as a secure storage backed by hardware, which houses your private keys for blockchain-enabled mobile services.” — Samsung
In protecting your private keys from any threat of theft or hacking, Knox employs technology which effectively separates the phone’s operating system from a secure and trusted storage where sensitive data is held. This is similar to Apple’s ‘Secure Enclave’, a special memory chip walled off from the rest of the phone’s memory, where your iPhone stores your fingerprint data to enable Touch ID. Even if hackers gained access to your phone via an unsecure connection, they can never access this type of secure storage.
The fact that Samsung labelled Knox as an ‘all-in-one blockchain platform’ also suggests that they plan on enabling other blockchain-based features in their phones further down the line.
Why does this matter?
While not the first smartphone company to feature a blockchain enabled device (that title goes to the Sikur phone), Samsung shipped 72.2 million smartphones in Q3 of 2018 alone and commands a market share of almost 19% (more than Apple). Samsung is literally putting access to blockchain technology in the hands of millions of consumers.
Here we have another heavyweight in its industry putting its rivals on notice that it is backing a future enabled by blockchain. And I don’t expect the likes of Apple to be far behind with a similar announcement.
In August 2017, Apple filed a patent titled “ Obtaining and using time information on a secure element (SE).” Reading into it, this ‘Secure Element’ would effectively operate in the same manner as Samsung’s Knox platform. Can we expect a similar announcement from Apple come September?
Where to from here?
The single most important enabler of blockchain technology is adoption. The cryptocurrency hype-bubble I talked about at the start of 2018 finally burst and potentially burnt many enthusiastic speculators, once again giving cryptocurrencies and, by association, blockchain a bad name.
However, with one announcement aimed at global institutional investors and corporate clients and the other aimed at retail consumers, these two corporate giants are flying the flag for this revolutionary technology and paving the way for mass adoption.