JP Morgan, Circle, and Stripe are proliferating corporate blockchains to leverage their existing customer bases and overcome public networks’ technical limitations. This trend is expected to surge over the next couple of years.
Expert analysis suggests these non-neutral networks will fail long-term because they do not embrace core blockchain values like disintermediation and independence. This structural flaw ensures public networks like Bitcoin and Ethereum will ultimately outcompete them.
Why Are Corporations Building Their Own Blockchains?
The growing institutional adoption of crypto has driven the proliferation of corporate-native blockchains. Established crypto players like Circle and Tether, as well as traditional heavyweights such as JPMorgan and FIFA, are fueling this surge.
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The surge in these blockchains represents the rising number of established companies launching their own Layer-1 or Layer-2 blockchain infrastructures.
A key feature of these networks is their ability to leverage existing, large customer bases from their traditional business operations. This capacity allows them to bypass the typical difficulty of bootstrapping first-time users.
They achieve this by hiding the technical details of the blockchain from users. By doing so, companies can onboard customers more easily, who can then use the technology without needing extensive knowledge of cryptocurrency.
According to Omid Malekan, a crypto industry veteran and a professor at Columbia Business School, corporations are also pivoting toward creating proprietary blockchains to adapt to technological disruption.
Recognizing the limitations of public blockchains like Bitcoin and Ethereum, many corporations are choosing to build their dedicated networks.
The Limitations of Public Infrastructure
The existing public blockchain infrastructure often doesn’t meet corporate requirements. Today’s networks face significant challenges, including slow speeds and security concerns. Their economic models can be volatile, and their infrastructure can suffer from downtime and delays.
Given these limitations, major corporations are taking their own blockchain initiatives.
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Google Cloud is piloting the GCUL as a private, permissioned layer-1 ledger for institutional finance. Meanwhile, payments company Stripe is building Tempo, an EVM-compatible Layer-1 designed to reduce the cost and time of global stablecoin payments.
Circle is also developing Arc, a Layer-1 blockchain optimized specifically for stablecoin finance, while Sony has created Soneium, an Ethereum Layer-2 to bring its massive ecosystem of gaming and entertainment on-chain.
Many more companies have announced blockchains slated for launch in the following two years.
Examples include FIFA, which is building its proprietary blockchain on an Avalanche subnet. Similarly, JP Morgan is advancing its bank-led Kinexys network for institutional clients. In parallel, Toyota unveiled using Avalanche to power its Mobile Orchestration Network (MON), an intermediary layer exploring tokenization and new mobility services.
Despite the proliferation of these corporate blockchains, Malekan doesn’t believe they have potential for long-term success.
Fundamental Flaws in Corporate Blockchain Design
Public and corporate blockchains fundamentally diverge in decentralization.
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Corporate entities, like those focused on payments, tend to misunderstand blockchain’s core value, treating it merely as a tool to make existing activities more efficient. They overlook its essential purpose: to empower communities by taking control away from centralized authorities.
Malekan argued that these fundamental differences will cut corporate blockchains’ future short.
Despite temporary pressure and potential market share reduction from corporate blockchains, Bitcoin and Ethereum are built to last. Ultimately, they function as immutable protocols that cannot be modified or interfered with.
While these corporations strategically launch their blockchains to stay competitive, they still face an ongoing challenge from decentralized networks that offer credibly neutral digital money.
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Bitcoin and Ethereum: Protocols Built to Last
Public blockchains threaten traditional finance by directly attacking its profitability and control. This disruption is broad, affecting corporate-backed initiatives and all legacy financial institutions.
Though they offer alternatives that better align with blockchain technology and its purposes, they continue to provide products controlled by the entities that the public chains are disrupting.
As Bitcoin and Ethereum continue to grow in popularity, Malekan argued that central banks will be among the first to suffer.
Meanwhile, corporate banks and fintech startups will also face competition over their fees.
In the end, expanding corporate blockchains represents a necessary and transitional step toward adopting disruptive technology. However, it does not secure long-term viability by itself.
Without a commitment to credibility and neutrality in these payment systems, this competition will inevitably be drowned out by existing, immutable protocols that guarantee a system built on disintermediation by design.
Source: https://beincrypto.com/corporate-blockchains-for-payments-are-gaining-popularity-but-will-they-last/
