Corporate Influence on the Adoption of Cryptocurrencies and Blockchains

Bitcoin eliminates the role of a single central authority in the creation and use of money, but its fate will be largely be affected by the actions of centralized corporate third parties.

I’ve reviewed how some of the world’s largest companies integrating blockchains into their operations and thinking about the technology to provide a starting point for assessing the role they might play in driving the adoption of cryptocurrencies and blockchain technology.

Square/CashApp, Twitter

Jack Dorsey, co-founder/CEO of Twitter and Square, has been following Bitcoin since the whitepaper was published and has recently become quite active in the cryptocurrency space both professionally and personally.

Square enabled the buying, selling, and holding of Bitcoin through its mobile payment service CashApp in January 2018. They sold $166 million worth of Bitcoin over the course of the year, netting them a small profit of about $1 million. Dorsey recently spoke at length about how he came to understand Bitcoin, why he believes the Internet and society need a native, open, digital currency, and new business models that are enabled by cryptocurrency.

When asked about the possibility of integrating Lightning Network payments into Twitter, he replied:

“ I think there’s a lot there, and it’s really compelling and something that we want to spend a lot more time on…we finally have technologies, more broadly at the blockchain level that I think can help us address some of the challenges we’re facing with Twitter including trust and identity, and certainly providing more economic incentive rather than just what Twitter provides today which is reach.

It is a pretty active conversation within the company and around the company, and we want to be smart about it and make sure that again, we’re building something that feels really simple and accessible and is timed in the right way. But it’s definitely something that I would be excited about and would love to see.”(36:28)

Dorsey has invested in Lightning Labs, is accepting Bitcoin tips on Twitter using tippin.me, held Bitcoin’s Lightning torch, and has been purchasing $10,000 worth of Bitcoin per week in anticipation of mass adoption. He also tweeted about his purchases of a plug-and-play full Bitcoin/Lightning node and a Trezor hardware wallet.

Starbucks

Starbucks, along with Microsoft and the Boston Consulting group, is backing Bakkt, a startup that aims to facilitate adoption of cryptocurrencies for the world’s largest financial institutions. Bakkt is owned by ICE, the owner of the New York Stock Exchange

In exchange for a generous portion of equity, Starbucks will allow consumers to pay-in store with bitcoin using Bakkt’s software which instantly converts cryptocurrency into dollars. Consumers will be able to “spend” their bitcoin at Starbucks, but the company’s final books will remain clear of cryptocurrencies.

Kroger

Kroger, the United States’ second largest grocer by revenue, has abandoned Visa credit cards in over 200 stores due to excessive fees charged by the payment processor. Shortly after the announcement was made, Anthony Pompliano tweeted an offer to have the team from Morgan Creek Digital fly out to help them integrate Bitcoin’s Lightning Network as a payment option.

A product manager at Kroger Digital quickly responded, moving the conversation to direct messages to set up a meeting with the company’s Chief Digital officer.

Samsung

After dismissing early reports as “rumor and speculation”, Samsung announced that their flagship Galaxy S10 would include a built in cryptocurrency wallet that supports Ethereum and select decentralized applications. Previous reports indicated that Bitcoin would be supported, but this isn’t the case for the initial version of the Samsung Blockchain Wallet.

Fidelity

Fidelity Investments is one of the world’s largest asset managers, responsible for over $2 trillion in assets. They’ve built and are currently testing “enterprise-grade custody and execution services for institutional investors” that want to invest in Bitcoin and other digital assets. The company started mining Bitcoin and Ether in 2017 and recently invested in blockchain analytics startup Coin Metrics.

J.P. Morgan

While Jamie Dimon has been making headlines for disparaging Bitcoin as a dangerous fraud, his company has been working to develop blockchain-based products. J.P. Morgan was a founding member of the Enterprise Ethereum Alliance that launched in early 2017 and has developed a fork of the public Ethereum blockchain, Quorom, that allows users to easily deploy permissioned blockchains.

They’ve recently announced JPM Coin, a private stablecoin backed by the U.S. dollar that is being tested for business-to-business payments in a small pilot group. Dimon believes that one day JPMcoin could be used for consumer payments.

The company is also contributing to research focused on applying zero-knowledge proofs to blockchain technology. This work could be used to allow clients to make use of public blockchains without giving up sensitive business data. Binance’s research group published a comprehensive analysis of JPM coin, and a former VP & Blockchain Strategy lead at JPM discussed his thoughts in a Twitter thread.

Facebook

In early 2018, Mark Zuckerberg announced that he would start studying cryptocurrency because it can “take power from centralized systems and put it back into people’s hands”. A few months later Facebook launched a blockchain division and they’ve recently acquired a blockchain startup. Facebook’s internal crypto team reportedly “works in an office off-limits” to other company employees and is being led by former PayPal president David Marcus.

Now, Facebook is developing a cryptocurrency that WhatsApp users will be able to send to friends and family instantly. They’re in talks with exchanges about listing the coin which may be pegged to a basket of foreign currencies. Zuckerberg also recently discussed the pros and cons of replacing Facebook Connect with a distributed blockchain-based service for logins.

Google

Sergey Brin lamented Google’s failure “ to be on the bleeding edge” of blockchain technology. Now, the company is making up for lost time. They’re developing blockchain search tools for public blockchains and working on their own “distributed digital ledger.” They’ve partnered with BlockApps to provide rapid-deployment blockchain solutions for the Google Cloud Platform.

Amazon

Amazon’s Managed Blockchain service allows users to easily deploy private blockchains hosted on AWS using Hyperledger Fabric or Ethereum. The company is working with Mastercard and Accenture to establish transparent “circular” supply chains.

Microsoft

Microsoft has developed its own blockchain management solution for its Azure cloud platform and has partnered with XYO to provide blockchain-based geospatial apps on the Azure marketplace. They also allow customers to use Bitcoin for topping up their accounts to make purchases in the Windows and Xbox stores.

The company is working on blockchain-based standards for decentralized digital identities that it believes can play an important role in defending human rights across the globe. They’re working with Spain’s largest telecom company to explore opportunities in blockchain technology.

Reddit

Reddit co-founder Alexis Ohanian was an early investor in Coinbase and is a true believer in the potential for cryptocurrencies to transform the world. He believes the current “crypto winter” that has seen prices plunge by 80–90% from all-time highs has caused speculators to flee and will allow the technology enthusiasts to focus on “building the infrastructure that it’s going to take to really make this happen.”

Reddit briefly experimented with creating their own cryptocurrency, “Reddit Notes”, in 2015. Former CEO Yishan Wong was excited about the idea of trying to “decentralize the company” using blockchain technology.

IBM

IBM’s hyperledger-based blockchain platform offers a suite of enterprise solutions and services for food trust, identity, and trade finance. Their Blockchain World Wire system facilitates cross-border payments that clear and settle in seconds using the Stellar network. Ethereum-based cloud computing platform iExec has integrated IBM Cloud to provide secure decentralized computing.

IBM is part of a consortium using blockchains to build a health utility network, and has partnered with The Freshwater Trust and the University of Colorado Boulder to combat drought in California through sustainable management of drought water using blockchain technology and IOT.

The company’s Head of Blockchain Solutions believes that Bitcoin could reach $1 million/BTC one day and stated they may be open to working with Bitcoin in the future.

Walmart

After a successful two-year pilot project with IBM’s blockchain platform, Walmart will be requiring lettuce and spinach suppliers to input detailed information about their food into a blockchain database by September 2019. This will allow the company to more efficiently track every bag of produce and determine where food was sourced from in seconds instead of days.

Intel

Intel has developed Software Guard Extensions (SGX) that can increase the privacy and efficiency of blockchain transactions. The company is a member of three blockchain consortiums, the EEA, Hyperledger, and R3, and is working with T-mobile to develop enhanced blockchain-based identity management technologies.

The Intel Select Solution for Blockchain “helps organizations prepare blockchain infrastructure investments, generate excellent total cost of ownership with general-purpose hardware, and accelerate time to market with a turnkey solution optimized for important software libraries.”

Apple

Apple hasn’t publicly announced any significant internal initiatives focused on blockchains. They recently made an SEC Filing that mentions their work in developing blockchain guidelines for the “Responsible Business Alliance’s Responsible Minerals Initiative”.

Apple co-founder Steve Wozniak has revealed that he holds small amounts of BTC and ETH after having sold the bulk of it during the most recent bubble due to not wanting to deal with the stress of high volatility. He has described Ethereum as a platform that could one day be as influential as Apple.

Elon Musk (Tesla, SpaceX)

Elon Musk called Bitcoin “brilliant” in a podcast interview with Ark Invest. He doesn’t believe it would be wise for Tesla to get involved with crypto, but his support for the technology could lead to future endeavors in this space.

2018 Industry Surveys

A Deloitte Survey of over 1000 executives from seven countries across the world found that 74% of companies see a compelling business use case for blockchain technology. A KPMG survey of several hundred global leaders in technology found that 48% of respondents feel it was “very likely/likely” that blockchains will change the way their companies do business in the next three years. 84% of respondents to PWC’s survey are “actively involved with blockchain”.

Open Disruption, or the Rearchitecting of a Closed Status Quo?

Ledgers and money are technologies that serve as key foundations for our social institutions, so it’s crucial to distinguish between the separate trends at play right now.

Some companies are embracing public blockchains and cryptocurrencies like Bitcoin and Ethereum, working towards a radical rethinking of the way we interact with money, conduct business, and organize to achieve common goals. Others are using permissioned chains primarily to increase the efficiency of existing operations. Some firms are experimenting with public and permissioned systems.

Who will play a more significant role? The Dorseys, Ohanians, Krogers, Starbucks, and Fidelities that are embracing open protocols, or the J.P. Morgans and Walmarts that are rolling out more centralized products? To what extent will Facebook, Google, Twitter, and Amazon embrace public blockchains, and what sort of consumer facing applications will they build with them? Will we see significant interaction between permissioned chains and public ones?

It’s easy to dismiss permissioned blockchains as meaningless and I don’t find them very exciting. But the fact is that the companies working with them have the power to shape the perceptions and behaviors of the general public, especially in the developed world, who currently doesn’t care much about “decentralization”, monetary theory, or central banking policy.

Adoption isn’t just about building innovative technology. It’s driven heavily by psychological and social factors: trust, greed, passion, fear, and tribalism. The systems we choose to build and the stories we tell about them will determine the role cryptocurrencies and blockchains play in our lives. The manner in which the world’s largest companies use blockchain technology will have a significant influence on its evolution and long-term societal impact.

“Will this be technology vs. humanity or will it be technology for humanity?

It is up to us to decide. We can solve problems. We can bake humanity into the code. We can work to make sure this new movement ferries us toward a more equitable, just, and progressive future” — Unblocked: How Blockchains Will Change Your Business (And What To Do About It) (P. 291)