Glenn Hutchins: No Blockchain without Bitcoin!
Currently, banks and financial institutions are investing a lot of time and effort in adapting the blockchain to reduce IT management costs and enable stable, cost-effective transactions. Glenn Hutchins points out, however, that Bitcoin behaves more like copper than like gold; just as electronics cannot exist without copper, according to Hutchins the blockchain cannot exist without Bitcoin.
Glenn Hutchins, co-founder of Silver Lake Partners
A $26 billion private equity firm, spoke at a conference hosted by Brookings Institution about the banks‘ growing interest in Blockchain technology. As is well known, many banks are working on a private blockchain. Hutchins commented on this:
„A private ledger behaves to the blockchain like the intranet behaves to the Internet. (…) The intranet certainly had strengths in the context of collaboration with colleagues, but a major transformation could only take place through a seamless world wide web. It makes banks happy to think about private blockchains, as this would keep the costs for the banks low.“
Banks and leading financial institutions are currently trying to adapt blockchain technology to keep IT costs low and enable stable, cost-effective transactions. The aim is to enable a novel, blockchain-based financial system for real-time regulation of payment transactions and asset values. Complete control over this would be achieved by adapting a system other than Bitcoin and a centralized blockchain solution.Hutchins points out, however, that Bitcoin would behave more like copper than like gold; the blockchain could not exist without Bitcoin any more than electronics without copper.
Bitcoin: The copper of the blockchain
Bitcoin acts as a quantum within the blockchain network to transfer things of countable value between users. Bitcoin derives its value from its demand and the high security guaranteed by millions of miners. Such technologies and currencies cannot simply be developed by individual, centralized organizations, and that, Hutchins said, is exactly what would differentiate Bitcoin from other, centralized legacy coins in its value and dominance.
„Copper is the more accurate analogy for Bitcoin; copper is a metal that is mined, it has a definite value and is an object of trade and barter. The fundamental reason for all this, however, is that it can carry electricity and voice messages; copper is a carrier for something we use every day. Likewise, Bitcoin is a carrier for the value we attach to this system. The system cannot function without this value.“
If banks such as the independent blockchain financial institutions participating in the R3 conference were to set up networks with centralized authority and arbitrary currencies, it would be like creating an intranet of international banks that could not be seen by the normal population.
Some financial institutions have already created their own blockchains, such as the Commonwealth Bank of Australia. But how these banks convert their internal crypto currencies into Fiat remains a mystery. Many financial experts speculate that banks are having difficulty building a blockchain technology because they do not yet have a method to introduce their own crypto currency with a long-term stable value.
Therefore, according to Hutchins, it is important to realize that it is hardly possible to use a unique and independent blockchain network without using Bitcoin as an international investment.
