Back in 2014, big-name financial institutions thought private blockchain projects were going to be the next big thing
Major companies' private blockchain initiative, R3, might be up for grabs. According to sources close to the matter, blockchain entities such as Ava Labs and the Solana Foundation have been a part of these alleged sale conversations, which have been ongoing for the past six months.
The reports come amidst a broader shift away from private blockchains and towards public networks like Bitcoin. While private blockchains were once touted as a way for banks to harness the efficiencies of blockchain technology within their existing regulatory frameworks, they ultimately faced several challenges.
These included a lack of interoperability between isolated ecosystems, the complexities of establishing governance among competing banks, and the realization that many of the proposed use cases could have been handled more efficiently by traditional databases.
In contrast, public blockchains have flourished due to their permissionless design, which enables trust minimization and faster innovation through global collaboration. As a result, many banks have left R3's consortium in recent years.
Among the key figures involved in R3's journey was former Bitcoin developer Mike Hearn, who played a central role in developing Corda, R3's blockchain-inspired distributed ledger designed for the financial sector. Hearn's contributions to R3's technical advancement were substantial.
However, it was announced in Feb. 2021 that Hearn would be stepping away from his full-time role at the company. Prior to his departure, Hearn spent about a year focused on Conclave, R3's confidential computing solution.
As R3 now faces the potential sale, it also grapples with the financial consequences of its efforts to adapt blockchain technology to the molds of traditional finance (TradFi).
“R3, the pioneer of private blockchains from 2014, is seeking an exit because there is no business,” said Mikko Ohtamaa, co-founder of tradingstrategy.ai, upon hearing the latest on R3. “The whole private blockchain was an oxymoron in the first place. The business benefits, in the form of cost efficiencies, in public blockchains come from — Open source (you do not need to pay license fees for the software) — Open access (you can read it yourself, no need to pay for APIs) — Open transact (you do not make a contract with a third party API provider to move your assets). R3 had none of these,” Ohtamaa concluded.
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