The biggest story regarding blockchain this month were incumbents leaving the R3 blockchain consortium. Sure, there were some other interesting happenings, but when three big financial institutions leave a consortium, it overshadows other happenings.
Goldman, Santander, and Morgan Stanley leaving R3 is bad for blockchain hype, but when looking at the details of why these companies left, it wasn't because of loosing faith in blockchain or trying to go another route. It was, to the shock of no one, about money.
R3 had asked members to invest in a $200 million series A round to be a part of the consortium. A few institutions balked at the idea of forking up a large investment for a product that wouldn't be their own, and left R3. In response, R3 lowered its funding goal to $150 million and changed the terms of the round. Reports have emerged that member banks are interested in investing a total of $59 million, a third of the lowered funding goal.
Though three incumbents leaving R3 is a big deal and hurts hype, what does it mean for the future of mainstream blockchain use?
On paper, the consortium model sounds like a good idea for blockchain. A bank that moves to a distributed ledger for transactions between its own accounts isn't changing much from the current system we have today. Just like banks agreeing to move to SWIFT, getting the most out of blockchain will only happen when a majority of institutions or retailers are connected via blockchain(s). So building blockchains as a group effort may be the best way to set up financial networks for the long run, and a consortium is smart way to accomplish that goal.
On the other hand, companies may not want to put the cart before the horse. We're still at the early stage of blockchain, and institutions may want to dip their toes slowly in the water of blockchain. Experimenting with blockchain inside a company and then figuring out a way to build it out may be the more realistic strategy. Once institutions get secure with blockchain, they can start to slowly bridge gaps between private blockchains, linking institutions when they want to, and working out how to bridge the gaps with APIs and other technology.
Though the consortium model may be the better long term solution, just because companies are leaving R3 doesn't spell the end for blockchain. Money was a big factor, and companies that left the consortium haven't abandoned blockchain. It just may take a little more time for banks and institutions be linked together via a blockchain.