Chain CEO: Bitcoin will not decline due to the rise of blockchain technology

In the past year or two, major financial institutions and technology companies have expressed interest in the blockchain technology underlying bitcoin. Many bank executives, such as JPMorgan CEO Jami Dimon, who initially dismissed bitcoin, are now paying more attention to the technology released by Satoshi Nakamoto in January 2009.

Adam Ludwin, CEO of Chain, a startup that is working with Visa, Nasdaq, Capital One, and other large financial institutions to explore the value of bitcoin technology, recently spoke with angel investor Jason Calacanis about the relatively young financial technology sector.

Calacanis told Ludwin that he thought Bitcoin would gradually decline with the rise of blockchain technology, but Ludwin believed that Bitcoin would never become obsolete.

Understanding Customer Needs

Chain was founded in April 2014, and its first product was a Bitcoin API. Ludwin said:

Developers came in droves [before we launched our first product] and said, ‘We want to learn about Bitcoin and build something interesting.’ Unfortunately, there was no platform, no Twilio, no Stripe, not to mention a developer-friendly development environment. Apps simply couldn’t run and connect to the Bitcoin network at the same time.

According to Ludwin, a few months after launching their first product, about a third of all bitcoin apps and services were built on top of their API.

In August 2014, Nasdaq, Fidelity International and FirstData all came to Chain, hoping to learn more about Bitcoin. Ludwin recommended several potential use cases for Bitcoin, but these financial institutions did not understand the needs of their customers in advance.

Every meeting with these financial institutions was the same. They said, 'Can you please explain to me how you can send money to Wikipedia or to our office in San Francisco using just your phone?'

They don’t understand the technical principles at all... I can only explain it in a way that they can understand, try to make them understand, but at the same time not to underestimate the innovativeness of Bitcoin.

Therefore, Ludwin generally describes Bitcoin as a solution to the double-spending problem, which is also the most important feature of Bitcoin. Then these financial companies will ask Chain to help them build securities trading, payment and other asset transfer projects on the Bitcoin blockchain similar to the Bitcoin operating model. Ludwin said:

From that moment on we decided the direction of the company's development.

Why Bitcoin won’t fall

Ludwin explained that financial institutions are more interested in real-world use cases for Bitcoin than Bitcoin itself, comparing it to BitTorrent.

Bitcoin will never go out of business.

Bitcoin is used by people who have escaped from the online world or want to escape from the online world (here referring to the insecurity of traditional online payments), which is why people are using Bitcoin today.

(Chain CEO Adam Ludwin)

Ludwin also cited a use case for Bitcoin, which can achieve "moral justice". Someone who disagrees with the government can use Bitcoin to donate to some companies or organizations that the local government is trying to ban. Calacanis believes that Bitcoin should be used in the recently popular American TV series "Mr. Robot" (the war between hackers and big groups). Ludwin added:

If you want to buy something online but don’t want your bank card details to be exposed, then you should use Bitcoin. This use case has nothing to do with speculation.

Disadvantages of public chains

Ludwin also mentioned the recent hard fork of Ethereum, which eventually split it into two blockchains. He believes that the split of the Ethereum community just proves the disadvantages of public chains.

Most people think that financial services firms should invest in Bitcoin or Ethereum or similar public networks. But they will never trust their customers’ money to such networks. Because the political process of such networks will cause factional fighting, and the bank’s money will likely end up in two or even three networks. This situation must not happen.

Ironically, Santander Bank announced at Devcon Two that it would develop applications on the Ethereum (forked) public chain. Reports suggest that there are regulatory obstacles to this project. Estonian large bank LHV has also worked with ChromaWay (a blockchain startup) to issue multiple assets on the Bitcoin blockchain. The Central Bank of Barbados (a Latin American country) even authorized the fintech company Bitt to issue Barbados' digital dollar on the Bitcoin blockchain.

Chain’s goal is to avoid the shortcomings of the public blockchain as much as possible and develop private ledgers for financial institutions. Ludwin said these new systems will have their own transaction models.

We will let (financial institutions) set their own network rules.