JPMorgan, Circle, and Stripe are popularizing enterprise blockchain to leverage their existing customer bases and overcome the technical limitations of public networks. This trend is expected to further accelerate in the coming years.
According to expert analysis, these non-neutral networks will fail in the long run because they do not embrace blockchain’s core values such as disintermediation and independence. This structural flaw ensures that public networks like Bitcoin and Ethereum will eventually beat them.
Why would companies build their own blockchains?
The increasing institutional adoption of cryptocurrencies has fueled the adoption of enterprise-native blockchains. Not only traditional big players like JPMorgan and FIFA, but also established crypto players like Circle and Tether are fueling this surge.
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The proliferation of these blockchains represents a growing number of established companies launching their own layer 1 or layer 2 blockchain infrastructure.
The main feature of these networks is the ability to leverage existing large customer bases from traditional business operations. This ability avoids common difficulties when bootstrapping first-time users.
They accomplish this by hiding the technical details of the blockchain from users. By doing so, businesses can more easily onboard customers and customers can use the technology without requiring extensive knowledge of cryptocurrencies.
Companies are also turning to building their own blockchains to adapt to technological disruption, said Omid Malekan, a crypto industry veteran and professor at Columbia Business School.
“(The factors are) a combination of a desire to create a more performant blockchain with unique capabilities for payments, and companies seeking to maintain power and profitability in the face of disruption,” Malekan told BeInCrypto.
Recognizing the limitations of public blockchains such as Bitcoin and Ethereum, many companies are choosing to build dedicated networks.
Limits of public infrastructure
Existing public blockchain infrastructure often does not meet enterprise requirements. Today’s networks face significant challenges, including slow speeds and security concerns. Economic models can be unstable and infrastructure can be subject to downtime and delays.
Given these limitations, major companies are moving forward with their own blockchain initiatives.
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Google Cloud is piloting GCUL as a private permissioned layer 1 ledger for institutional finance. Meanwhile, payments company Stripe is building Tempo, an EVM-compatible layer 1 designed to reduce the cost and time of global stablecoin payments.
Circle is also developing Arc, a layer 1 blockchain specifically optimized for stablecoin finance. Meanwhile, Sony created Soneium, an Ethereum layer 2, to bring a large ecosystem of games and entertainment on-chain.
More companies are announcing blockchain launches over the next two years.
Examples include FIFA, which is building its own blockchain on the Avalanche subnet. Similarly, JPMorgan is promoting its bank-led Kinexys network for institutional investors. At the same time, Toyota announced that it will use Avalanche to power its Mobile Orchestration Network (MON), the middle layer that explores tokenization and new mobility services.
Despite the proliferation of these enterprise blockchains, Malekan doesn’t think they have a chance of long-term success.
Fundamental flaws in enterprise blockchain design
Public blockchains and enterprise blockchains are fundamentally different in decentralization.
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Companies, such as those focused on payments, tend to misunderstand the core value of blockchain and treat it only as a tool to make existing activities more efficient. They overlook its essential purpose: to empower communities by taking control away from centralized authorities.
Malekan argued that these fundamental differences shorten the future of enterprise blockchain.
“They are not neutral and are likely competitors, so they will alienate users, publishers and developers who do not fully trust these companies,” he said.
Bitcoin and Ethereum are built to last, despite temporary pressures from corporate blockchains and potential market share declines. Ultimately, they serve as immutable protocols that cannot be changed or interfered with.
“Users, publishers and developers will be attracted to such chains because they are perceived to be secure. Even if these networks grow and become important, they cannot start abusing users like corporate chains can, and the TradFi infrastructure…historically (has) done so,” Malekan added.
Although these companies are strategically launching blockchain to maintain a competitive edge, they still face continued challenges from decentralized networks that provide reliable and neutral digital money.
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Bitcoin and Ethereum: protocols built to last
Public blockchains threaten traditional finance by directly attacking profitability and control. This disruption is widespread, impacting all corporate-backed initiatives and traditional financial institutions.
They offer alternatives that are better suited to blockchain technology and its purpose, but continue to offer products controlled by entities that public chains are disrupting.
As Bitcoin and Ethereum continue to grow in popularity, Malecan argued that central banks will be the first to suffer.
He said: “The main challenge for central banks will be decentralized and ‘safer’ currencies like Bitcoin and stablecoins. It will be much harder to force citizens to use national fiat currencies in the digital future. This will make it harder for central banks to print excess currency.”
Meanwhile, corporate banks and fintech startups will also face competition for fees.
“Intense competition will force them to pay more deposits and less disbursement fees. A neutral network like Ethereum will bring the closest thing to perfect competition we have seen in finance,” Malekan added.
Ultimately, the expansion of enterprise blockchain represents a necessary and transitional step towards the adoption of disruptive technology. However, this in itself does not ensure long-term viability.
Without a commitment to the reliability and neutrality of these payment systems, this competition will inevitably be drowned out by existing immutable protocols that ensure systems built on disintermediation by design.
