But as those same institutions pursue blockchain trials and proofs-of-concept focused on finance, both startups and established companies are setting their gaze beyond the world of banking.
Speaking at today's Consensus 2016 blockchain conference in New York, leaders from those firms, alongside legacy players looking to build new products for their clients, painted a broad portrait of how distributed ledgers are positioned to change much more than how we control and spend our money.
What could have easily become a competition for which platform is best for building smart contracts turned into a conversation about the importance of a diverse ecosystem to the nascent industry.
Speaking on the panel about how to make the most of smart contracts Ethereum consultant Taylor Gerring smiled when asked by the moderator which platform he would use if building a smart contract. Gerring acquiesced with the expected sales pitch for Ethereum and its Turing-complete architecture. The audience laughed with recognition of the obvious answer.
But, panelist Diego Zaldivar of open-source smart contracts platform Rootstock, which last month raised $1m, soon stepped in. "For me it’s not a competition," he said. "What we are doing is building a full new ecosystem, like we were doing back in the web."
Gerring responded by pointing out that blockchains like Ethereum and bitcoin aren’t the only platforms for smart contracts, citing work from InterPlanetary File System (IPFS) as an example of other even newer ways to write smart contracts.
Patrick Murck, of Harvard’s Berkman Center for Internet and Society, interjected that during the early days of the smart contract ecosystem it was important not to rush to standardization too early.
"The biggest risk is that we move too fast on standards and we don’t let people experiment," he said, adding: "let standards emerge naturally."
If smart contracts are given a fertile environment in which to grow, Peter Van Valkenburgh of Coin Center argues they will eventually give people an increased sense of control over privacy.
Currently, technology users are forced to accept the terms of lengthy privacy agreements with very limited options if any. "It’s a desert right now," he said. But with smart contracts, users could in theoretically be empowered with the ability to tailor their privacy contracts.
Van Valkenburgh said:
"With the proliferation of tools to have your data manipulated or not manipulated in any way…the consumer is potentially given much more choice."
The world’s underbanked are underbanked due to the cost it takes to serve them, according to Pablo Gonzalez, CEO of Bitso, a bitcoin exchange serving Mexico. Compared to the relatively tiny amounts of cash those users might deposit, the expenditure rarely generates profit for the bank. But as more and more of the world becomes connected, Gonzalez thinks that discrepancy will diminish.
"The growth the the bitcoin network globally gives value to what we’re doing," said Gonzalez while speaking on a panel of entrepreneurs working to bring digital currencies to emerging markets.
Gonzalez was joined by Ola Doudin, CEO of BitOasis, a bitcoin exchange in Dubai, serving the Middle East and North Africa. "It’s a fast growing market," she said. "But underserved." According to Doudin about 80% of adults and businesses in that area don’t have access to financial services. Like other members on the panel, she advocated for an update to national regulations that would make it easier to serve emerging markets. “It’s a huge opportunity for us,” she said.
Sunny Ray of Unocoin also sat on the panel, and said his company is working to bring banking service to the 200 million people without such services and Marcus Swanepoel of BitX spoke about his work to serve Southeast Asia and Africa.
Ben Gorlick of Blockstream stood out from the rest of the panel in that his company isn’t targeting any specific region, but is working to provide sidechain technology on the bitcoin blockchain for use by companies like those on stage. He told the audience that one of Blocksteam’s vision for the world is to create fungibility for any user no matter where he or she is from.
"You want to be able to go all over the world and spend your money and feel like your money is your money."
Innovations to insurance
Since the middle of last year, the potential applications of blockchain to cut costs and increase the efficiency of insurance products has become an increasingly discussed topic. Panel moderator Michael Fitzgerald of Celent addressed the crowd of about 300 people: "I think it’s going to be good that someday when we die we’ll be on the blockchain somewhere."
The four panelists discussing how to bring blockchain to insurance represented equal parts upstart disruptors and legacy players looking to keep their edge.
Enterprise innovation vice president of USAA, Darrius Jones, estimated that about two-thirds of the insurance and financial company’s efforts with blockchain are to ensure the company remains relevant in the eyes of its customers. The remaining one-third of its efforts are to increase procedural efficiency.
Jones said his company, which earlier today announced it has joined a blockchain policy group with Microsoft, didn’t have any problems insuring cars or other property owned by a single party. But as companies like Ford make plans to let multiple people own cars smart contract on a blockchain could help manage that complexity, he said.
Leanne Kemp, of blockchain provenance startup Everledger, added that when value is directly connected to an insurable asset’s value — as it is in the case of the diamonds with which she currently works — fraud is particularly harmful. Her company, helps track the the origins of diamonds which can be less valuable if they are obtained in unethical or uncertain ways.
For that reason she says: "This industry more than ever wants to have transparency."
Elsewhere, Gem's Micah Winkelspecht voiced belief that projects like his recently launched Gem Health have the potential to eventually "remove reconciliation altogether," but that distrust of the technology by the government is slowing adoption.
"It’s going to be a few years before we see any public infrastructure projects."
Digital asset trading
The general consensus among members of today’s panel on how to upgrade capital markets was that bitcoin itself will eventual be valued more than gold.
"I think it is fundamentally a new asset class," said Juthica Chou, cofounder of LedgerX. "It offers utility as a method of payment that gold doesn’t." Chou’s startup is currently awaiting regulatory approval from the CFTC to build an institutional trading and clearing platform with an eye to helping create a robust derivatives market.
While Chou thinks bitcoin will eventually be a more valuable asset than gold, she said it will always be limited by its market cap, which is about $6.8bn. But that might not be so big a problem if founder of Digital Currency Group, Barry Silbert is correct.
Silbert predicts that $1tn dollars will flow into the digital currency asset class over the next 10 years. He added that much of that money won’t come from individual investors.
"It’s primarily going to be central banks," he said, explaining that while banks won’t likely ever cap the supply or distribute their power much further than it is already, there is still a likelihood they might create a digital currency of their own. "Some central banks are going to do it,” he said. “But it doesn’t mean its going to be better than bitcoin."
For his part, the CEO of BTCC, Bobby Lee spoke about the impact of Chinese policy on the status of bitcoin as an asset and the Michael Moro, CEO of Genesis Global Trading, added that gold’s only advantage over bitcoin is its history of being an asset.
"People of the world have a much better understanding of gold than they do of bitcoin."
Identity and personal security
This humorous panel kicked off with talk about the possibility of protecting ones private key for accessing encrypted data by converting it to a QR and and tattooing it on a very private body part.
The moderator, David Birch of Consult Hyperion, was presumably being hyperbolic (though he provided no proof), but his point was well taken: protecting one’s identity can result in some extreme precautions.
Panelist Justin Newton of name-verified wallet-provider Netki told the crowd that protecting identity might not be a one-stop-shop in spite of the fact that most of us only have one identity. Newton said that "one of the things we talk about when we talk about a topic as broad as identity is to think about what the use-case is".
Panelist Vinny Lingham said he’s got a personal interest in protecting identity as the owner of a South African passport he says is so frequently counterfeited that many countries not loner accept them.
"I can’t wait to get my US passport this year," he said. Earlier this year Lingham left Gyft after raising $2.75m for identity network startup Civic. "We’re building this for a mass market consumer play, but we’re using blockchain to make it more secure."
Another recently launched company, ShoCard has raised $1.5m to build its drivers license-based digital identity company. Panelist Armin Ebrahimi said his company is building a digital identity platform for mobile devices that sits on top of the blockchain where each party still owns their own data.
"We use the blockchain as points of validation," he said
Also on the pnael, Case founder Melanie Shapiro spoke about how her company lets its customers user fingerprint biometrics to not only access their accounts but create the user-key itself, while Christian Lundkvist detailed ConsenSys' work to protect identities using the Ethereum blockchain.
Images via Michael del Castillo for CoinDesk
See the all the videos from Day 1 of Consensus 2016 here.