A Reuters report today contends that the largest American bank J.P. Morgan Chase may announce a merger with Ethereum company Consensys within six months.
“The deal is likely to be formally announced within the next six months, but financial terms are still unclear, the people said,” writes Anna Irrera. “Around 25 people currently work on the Quorum team globally, and it is unclear whether they will join ConsenSys after the merger, the people said.”
This is bigger news then some traders perhaps realize – and J.P. Morgan’s strategy may be a precursor to a new age where centralized coin offers are made more attractive by blending their walled gardens with outside companies branded in a more decentralized fashion.
It wasn’t too long ago we were reporting on Consensys laying off workers, and wondering whether the independent company, which works on decentralized Ethereum chains (to put it in a simple way) was in a downward spiral.
The J.P. Morgan Chase move would solve that problem – but it would also solve a problem for J.P. Morgan’s JPM coin, which is largely seen as a centralized and company-controlled stablecoin on par with Facebook’s Libra.
The problem with Facebook’s Libra, and the problem with JPM coin by extension, is that completely centralized ownership and control goes against the essential principle of cryptocurrency – when Satoshi first created Bitcoin, the idea was that ownership and transaction evaluation were, in a word, consensus-based.
Trustless verification and all the rest of it was tied to true decentralization where no one party had control of the blockchain. That led to concerns about 51% attacks, in which parties would buy up a controlling stake in a particular blockchain and use that to propagate fraudulent transactions.
As scary as they may be, 51% attacks indicate that the blockchain is truly decentralized. By contrast, creating a branded company coin and linking it to the U.S. dollar is not really a true cryptocurrency in the original sense of the word.
“Would JPM Coin simply be a digital currency, rather than a cryptocurrency?” wrote Madhvi Mavadiya at Forbes last year, talking about this important discrepancy. “If JP Morgan’s new coin operates privately and is only used for money transfers between the lender and its clients, it would not operate on a public network in the same way that cryptocurrencies such as bitcoin or ethereum do.”
Here’s why a J.P. Morgan/Consensys merger would be so important – by getting a formerly independent blockchain operator into the mix, J.P. Morgan can abstract the centralized nature of its coin, to the extent that traders and consumers and everyone else will essentially lose sight of the ball inside the three cups.
The way that Marie Huillet explains this in Cointelegraph today is that “Ethereum ties (for JPMC) are a plus” – while Huillet suggests that the merger would not impact the course of the JPM coin, it stands to reason that softening the organizational chart for JP Morgan in this way could create quite a lot of confusion and uncertainty.
Keep an eye out.