Banking Technology

Why would JP Morgan spin off Quorum?

jp morgan chase

JP Morgan’s Quorum blockchain platform could be spun off according to reports by the Financial Times and Reuters. The platform is one of the leading options for enterprise blockchain solutions.

Quorum is an open source project based on Ethereum. It adds additional privacy and security features that are attractive to enterprises using it in a permissioned network. They worked with Zcash to incorporate zero knowledge encryption.

Why divest?

The reports state that JP Morgan’s involvement could be a drag on adoption of Quorum as other banks may be reticent to use it because of JP Morgan’s participation.

That may be a factor, but there are more likely reasons.

For any enterprise to adopt a technology, there needs to be enterprise support. That’s not JP Morgan’s sweet spot of expertise.

Another issue is an open source project doesn’t fit well with a major bank.

At a recent event, the head of the Quorum unit, Amber Baldet, commented that open source was new to JP Morgan. “Running an open source project within a highly regulated entity has been a huge learning experience,” she said.

“JP Morgan did not have a GitHub presence before this, had never really open sourced anything that was a real community project. And there have certainly been challenges in doing that, but it’s also been great to have that support.”

It’s unclear if Baldet would stay on if the unit is spun out. Her personal inclination is more towards public blockchains and perhaps she was planning a move anyway. At the same conference, she commented that “I really don’t know if enterprise anything needs to exist.”

Instead, she envisions something more similar to the internet which is leveraged for both personal and business uses, “but you use a variety of features if you are running a high-security kind of business. I feel like that’s the direction we should be going.”

Many technologists believe that permissioned blockchains are the equivalent of intranets in the early days of the internet, and in future businesses will use public blockchains with additional security and privacy features.

Other blockchains

Even though JP Morgan has sponsored the development of Quorum, it’s not the only blockchain technology that the company is involved with. It was one of the early banks to work with R3’s Corda but dropped out. A consortium of other banks own R3, and JP Morgan needs to trade with them. So there’s a possibility it could be using the technology again.

The bank also invested in Digital Asset Holdings which has solutions that use the Hyperledger Fabric protocol.

Conclusion

JP Morgan probably is considering divesting. Not just because their involvement might deter other banks, but because an open source project doesn’t fit, the project needs to provide enterprise support, and perhaps Baldet is heading in a different direction.

Image Copyright: demerzel21 / 123RF