On Monday, JP Morgan posted a job advertisement for a Blockchain Architect. The role is to build the “architecture strategy and best practices for the Blockchain Engineering team.”
The job mentions required experience with Ethereum, which is no big surprise given the Quorum blockchain developed initially by JP Morgan is based on Ethereum.
However, it also asked for experience with Bitcoin and knowledge of open-source blockchain platforms, including Proof of Stake. We’ll come back to this latter point.
The move is interesting at a number of levels. Firstly, JP Morgan handed over its permissioned enterprise blockchain Quorum to ConsenSys. That’s largely because supporting an open-source enterprise blockchain project doesn’t fit with JP Morgan’s everyday activities.
There is already a precedent for using permissioned proof of stake blockchains. Figure Technologies, one of the higher profile blockchain startups outside of the cryptocurrency sector, uses Provenance, a proof of stake permissioned blockchain. To date, Figure has been valued at more than a billion and processed more than that on its blockchain by logging mortgages, loan issuance and asset-backed securities.
Why is JP Morgan interested in Proof of Stake?
JP Morgan recently created the Onyx group to focus on blockchain activities. It has the existing Liink payment messaging solution (formerly IIN), JPM Coin and an intraday repo solution.
What hasn’t attracted much attention is an important Singapore project launched in December where JPM Coin is being explored as a solution to interbank multi-currency payments. Initially, the project is within Singapore, but the goal is an international one.
Both the repo and multi-currency payment solutions will involve very high-value transactions, which could raise concerns about whether blockchain transaction validation could be gamed.
And banks are rather known for their affinity towards game theory. As highlighted in a recent BIS paper, there is scope for gaming in a consortium blockchain. Apart from outright bribery, sometimes validators might not bother to validate a transaction and go with the majority. For high-value transactions, that would be an issue.
With Proof of Stake, the node operator has to put their money, their stake, on the line. If they misbehave, they can lose money. But they also earn money for their participation.
Speculatively, this could be the reason for the interest in Proof of Stake. Alternatively, JP Morgan is getting more interested in public blockchains.