Opposing camps have emerged regarding the debate of permissioned ledger technology and Bitcoin. Here I summarize my thoughts on this dynamic and make the case that permissioned ledger tech and bitcoin represent two radically different experiments; one evolutionary — the other revolutionary.
A Difference in Opinion
I think it is fair to say that the perspectives of these camps could be summarized as follows:
Proponents of Permissioned Ledger Tech: Believe it is possible to harness value through blockchain technology innovations without the requirement of decentralization or native tokens. Believe a blockchain is a distributed ledger. Are generally blockchain agnostic. Work with legacy systems to explore savings opportunities such as clearing. (Ex: Ripple, R3 CEV, ERIS).
Opponents of Permissioned Ledger Tech: Believe the primary benefit of blockchain technology is the ability to transact P2P without the need for a 3rd party (legacy systems). Believe a blockchain is a distributed and decentralized (to the extent possible) ledger with a native token. Generally support the most decentralized blockchains; bitcoin, litecoin, ethereum, etc.
I imagine many will read these definitions and assume that these two camps are fundamentally at odds with one another. In the landscape of public debate they are often presented as such.
I believe these assumptions to be misguided based on the idea that these experiments (permissioned ledgers & bitcoin) represent two drastically different efforts. Permissioned ledgers represent projects focused on improving legacy systems. Bitcoin and decentralized blockchains represent a movement to remove the need for legacy systems entirely.
Evolution vs. Revolution
Revolution can be defined as a sudden, complete or marked change. When comparing the Tesla to the first airplanes the superiority of the airplane is the result of a revolution in the concept of transportation.
Blockchain Technology: Evolution & Revolution
Permissioned ledgers represent an evolution in banking. The goal of permissioned ledgers experiments is to explore how legacy systems could marginally improve with the use of the technology. The primary focus is to understand what kind of savings and efficiency might be achieved to the benefit of financial institutions and their customers. If I were to take the liberty of assuming the principles of those working on such efforts I might imagine them being as follows: explore how blockchain technology can provide better services at lower cost to customers.
Distributed and token-based technologies like Bitcoin represent a revolution in banking. The seed of bitcoin efforts (and where most of the debate in the space is focused) is how to establish as decentralized a system as possible to ensure transactions can be secured P2P with no middle man. This is revolutionary in both thought and application and has significant implications if the movement grows. If I were to take the liberty of assuming the principles of those working on decentralized efforts I would imagine them being as follows: explore how blockchain technology can establish a sustainable system enabling P2P transactions without the need for a third party.
A Healthy Co-existence
An evolution in banking is a good thing. If legacy institutions can leverage permissioned ledger technology in the short term, however marginally, to reduce costs and improve the services they provide their customers this is a good thing. Who doesn’t want to be charged less and have faster clearing of their assets?
A revolution in banking is a great thing. If the promise of P2P systems like Bitcoin can be achieved at scale in the long term the world will be a dramatically different place in the decades ahead (likely for the better). Who doesn’t want to have true financial autonomy?
Today we have both planes and automobiles. Despite the revolutions in transportation not everyone is a pilot — and evolution in automotive technology is welcome and frequent. These technologies co-exist and likely will for some time.
I view permissioned ledgers and blockchain experiments in much the same way. Despite the revolutionary opportunities Bitcoin foreshadows not everyone uses it yet — and evolution in modern banking should be welcome in the interim.
That being said, I welcome the day I can fly my Tesla over a river while paying my electric bill in bitcoin.