Why are blockchain experts from big banks going to startups?

In recent months, there have been reports of blockchain innovators leaving large financial institutions to work for small startups, but the reasons behind this have left many people scratching their heads.

Until now, little has been known about this issue because large companies rarely disclose information and startup founders mostly remain silent, as they are accustomed to establishing partnerships with their former employers.

This year, BNP Paribas, Deloitte, JPMorgan and State Street have all lost blockchain talent to lesser-known startups such as DPactum, Kadena and Nuco. However, some blockchain experts left without stating the reason, such as the founder of the Philippine Blockchain Lab (PBL).

Representatives of some startups said in interviews that the departure of blockchain experts is to allow more companies in the industry to learn about enterprise-level blockchain research results. Instead of cutting major expenses, startup founders chose to accept more blockchain talents because this can bring them more and faster financing.

Stuart Popejoy left JPMorgan Chase's blockchain project in July to set up Kadena, a private blockchain-based financial services company. He said his departure was related to opportunity and need.

While working at JPMorgan, we realized that scalable blockchain was possible, but someone had to take the responsibility of sharing the technology within the industry. After all, blockchain is essentially a cross-institutional technology, but JPMorgan's research results were used to solve its own internal problems first.

However, Popejoy is not fighting alone. His colleague, JPMorgan Chase developer Will Martino, has also joined Kadena. They want to show their research results in the market. In their view, there is still a lot of room for progress.

Popejoy said that even blockchain teams at large enterprises have yet to truly understand basic technical issues, such as scalability, transaction privacy, smart contract security, or even specific implementations of blockchain.

When we were in the bank, we simply could not provide a practical use case without sacrificing the stability and simplicity of blockchain. This is why we chose to go it alone.

Natural Development

Some financial executives do not choose to start their own companies, but instead jump directly to start-ups.

Jeremy Drane was the blockchain director at PwC, one of the Big Four accounting firms, before becoming the chief culture officer of blockchain startup Libra. Drane said he has also noticed the brain drain from large institutions, which he believes is a necessary process for technology to move from experimentation to reality.

What we are seeing now is the first round of program migration from innovation budgets to enterprise-level assessments (from research to application), which is a more rigorous process. In addition, the rules and flexibility of management of the two are very different.

This is one of the reasons why blockchain experts are leaving large institutions, but some industry analysts believe that the "attraction" cannot be ignored.

For those professionals who are committed to innovative development, pushing technology to the production line is not their goal. Instead, they hope to convey their research results to the entire industry through start-ups.

Antony Lewis, a blockchain consultant, said:

Push and pull factors are likely the main reason. Blockchain experts are more likely to be able to play a role in an enterprise than to lead a team in a large organization.

There are a large number of blockchain startups in the market, most of which are in the financial services sector. Large companies in other fields are in urgent need of help in blockchain technology research. Consumer goods companies, entertainment and media companies, and some humanitarian and international aid projects are all paying attention to blockchain.

Ripple founder and CEO Chris Larsen said the exodus of talent from large companies shows that both banks and startups are positive about blockchain.

If this means anything, it’s that blockchain is growing faster and faster, and (experts) are aware of this trend and are trying to be at the center of the revolution.

Uncertainty Remains

Some people also expressed concerns about this.

Gideon Greenspan, founder and CEO of private blockchain solutions provider Coin Sciences, said he was concerned that market confidence in some actual blockchain use cases, including clearing and settlement, had been shaken, and that use cases had received special research and development grants.

Most of the banks’ investments in blockchain are based on this use case, rather than seeing it as a shared database (which is what blockchain is best suited for). If the brain drain continues, they will likely cut back on research funding in this area.

However, Greenspan said that the big banking project has not abandoned his company’s Multichain platform, which he said could be used to create crowdfunding platforms and a shared document authentication service.

Banks are likely to pull back on external investments and partnerships due to the glut of blockchain startups in the market. Greenspan said:

Banks may choose to wait and see which platform is suitable for developing their projects.

Analysts say many banks simply don't have the expertise to filter and vet startups' projects.

From the current situation, the industry seems to be stuck in the hype circle. Many people think that 2017 will be the year of blockchain, but it seems that it will take several years to achieve this goal.

Drane concluded:

I understand those who are skeptical, it will take a long time to build a complete system.