Sunday, 6th November, 2016
| The fork in the road
TL;DR Both Visa and MasterCard are experimenting with blockchain technology, but with contrasting approaches. What are the main differences? And why does it matter? (Read more in THE TAKEAWAY below.)
TOP 5 STORIES ON COINDESK Microsoft's ethereum bet. The blockchain-as-a-service sector just got a bit more competitive. Microsoft will soon add a private ethereum blockchain to its roster of services for enterprise. The aim is to make it easier to build consortia that can leverage smart contract applications. Bigger sandbox.
Buyer beware. A blockchain VC spells out the pros and cons of ICOs, and highlights the legal pitfalls and governance dangers. There are advantages, though, and the future of this alternative financing could be bright. But we need to be careful.
More problems in ethereum. A bug has been discovered in Solidity that affects some smart contracts, most of which can’t be updated. The impact is limited, but the implications point to conflict ahead. Tell me more.
An interesting approach: a group of South African banks have tested a system for issuing syndicated loans on the blockchain, with regulators and the central bank on board. Get them involved early. Sounds efficient.
Bitcoin’s next step: the SegWit update to the bitcoin code has been released. Is this going to allow bitcoin to finally move on to apps? Or will it bring on more squabbles? Find out more. More Blockchain News →
QUOTE OF THE WEEK “ ...“the blockchain” is not going to emerge in industry as a single platform, as it was once imagined, but as a series of different blockchain platforms designed for different purposes.” – Jeff John Roberts, 'Why Blockchain Fails - And When It Will Succeed', Fortune |
THE TAKEAWAY
Earlier this week CoinDesk revealed that MasterCard has quietly released a series of blockchain APIs for developers.
While we all knew the payments company was looking at the technology, the announcement contained one significant surprise: the strong contrast between MasterCard’s approach, and that of its main competitor Visa.
Let’s look at the main differences one by one, and then have a think about the potential impact.
1) MasterCard’s tactics are subtle. There’s none of the fanfare that we’re used to when developments in this space are announced. The APIs were gently slipped onto the “new & experimental” part of the company’s developer web last month, to gauge interest. And the revelation that MasterCard even has a blockchain will come as a surprise to many.
Visa, on the other hand, has over the past couple of years issued relatively frequent announcements about blockchain milestones with grand ambitions and high-profile partners.
2) The nature of the APIs indicates a very different approach to implementation. Rather than focus on a couple of use cases (like Visa does with international corporate payments and remittances), MasterCard aims to make it easier for a range of merchants and banks to incorporate payment functionalities into their services.
One set of APIs lets businesses run their own blockchain nodes, specifying transaction types and participation parameters. The other offers a smart contract framework to make it easier to develop custom blockchain applications. Both can be used in a wide variety of use cases, such as transfers, e-commerce, gaming transactions and IoT payments.
3) MasterCard’s strategy seems to be intentionally vague, which leaves it plenty of room for pivots and changes of focus. Rather than trying to go deep into a market, it appears to cast a wider net in order to see what sticks.
Visa’s recent strategy is clear: it wants to sign up a large number of banks for cross-border transfers on behalf of its corporate clients.
4) Visa aims to disrupt an existing service. It wants banks to keep doing what they’ve always been doing, but on their blockchain.
MasterCard is going for innovation by enabling businesses to develop their own ideas and to implement payment functionalities in new ways, using blockchain advantages.
Which strategy will win the race? The thing is, it’s not a race. There is little doubt that blockchain technology will (at some stage) form part of the payment companies’ operations. We don’t yet know how, or what impact it will have on their business models.
The competition between the two has been intense. But with fundamental differences emerging through their blockchain approaches, could their respective business strategies start to diverge?
Perhaps Visa will specialize in cross border payments, while MasterCard focuses on business services. One may become strong with banks while the other wins a reputation for creative commercial applications. With more payment options available and a greater need for innovative solutions, we could see both companies use blockchain technology to carve out new competitive positions. And with that, they could end up playing a fundamental role in the realignment of the financial sector.
– N
More background:
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OTHERS ARE TALKING ABOUT...
The media seemed to turn a bit sceptical this week. Fortune welcomed the end of the blockchain hype, and Bloomberg threw shade on bitcoin’s apparent (and relative) lack of anonymity as well as its inadequacies as a safe haven.
Elsewhere, the BBC had a charming article about digital identity, signatures and pens. The FT published a couple of good overviews on cryptocurrencies, and on banks’ interest in digital currency.
And Motherboard reported that weed growers are registering their strain on the blockchain. The uses of the new technology never cease to surprise. Next up: marijuana supply chain management?
UPCOMING EVENTS
WHAT WE’VE BEEN UP TO We’ve packed boxes, emptied out drawers, climbed stairs and… moved office.
Yes, we are now a few floors above where we used to be, in a bigger and brighter space with wooden floors and great views.
If you would like to send us a fruit basket or a box of cookies as an office-warming present, we’re still in the same building, so feel free to leave it at reception. 😉
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