To some people, it may seem like the traditional financial world is only showing an interest in distributed ledger technology, rather than the concept of Bitcoin. While this may be true to a certain extent, Bitcoin is not held back by any of the banking problems, centralization, or inflation. Plus, it is important to keep in mind these same institutions were opposing the blockchain as well until very recently. In the end, they will come around to Bitcoin as well. A private blockchain is far from a perfect solution.
Also read: Bitcoin Needs More University Education Efforts To Reach Millennial Demographic
The Private Blockchain Hype Without Bitcoin
Looking at things from a technical perspective, it is entirely possible to have a blockchain concept that is not directly linked to Bitcoin itself. Even though are plenty of companies building on top of the Bitcoin blockchain for a very particular reason, traditional financial institutions don’t see things the same way just yet.
There is one thing these financial players tend to forget, and that is the main reason the blockchain has become such a major point of interest all of a sudden. People see the potential of this technology within and outside of the financial sector and think they can copy the technology in a private, closed loop environment.
For certain purposes, this approach may prove to be more than sufficient, as it will help speed up internal procedures and protocols. But for the most part, a private blockchain will ultimately become irrelevant as they lack the important trait of decentralization. Contrary to what some people might think, decentralization and private blockchains are mutually exclusive.
When a financial institution rolls out their private blockchain, they have created a product for internal purposes. There is no decentralization to speak of, as that particular blockchain will only work for internal needs. Even though various private blockchains are capable of communicating with others, they will have to rely on central entities bridging the gap. In the end, this is the exact opposite of what decentralization means, as there will always be one or multiple intermediaries involved.
Banks are trying to replicate what has made Bitcoin so successful over the years, but they will never be able to do that with their approach to creating private blockchain. Bitcoin managed to achieve true decentralization by using one blockchain accessible to anyone in the world, without the need for central oversight. Traditional finance has a hard time letting go of their firm grip on people’s money, and a private blockchain is not the answer.
Partial Source: Business Insider
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