Public blockchains are still insufficient for handling large volumes of transactions, as stated by a former JPMorgan executive. Umar Farooq, the CEO of JPMorgan’s blockchain-based payment platform, Onyx, made these remarks during the BIS Innovation Summit on May 7. He was responding to the concept of the Unified Ledger introduced by the Bank of International Settlements (BIS) last year, which aims to facilitate central bank money flows, tokenized deposits, and digital assets on its network.
Farooq elaborated on his criticism by explaining that if a $100 million transaction were to fail, public blockchain validators cannot be held accountable. In contrast, JPMorgan’s Onyx platform, which is based on a private, permissioned version of Ethereum, allows institutions to reverse transactions. Despite his criticism of public blockchains, Farooq also emphasized that blockchains, like the internet, should be considered a public good.
Furthermore, Farooq argued that cryptocurrencies issued on public blockchains create false incentives to attract more users and drive up the coin’s price. However, his remarks were met with opposition from traditional financial institutions (TradFi) who prefer tokenizing assets on public blockchains. Celisa Morin, the former vice president of platform distribution at Grayscale, suggested that BlackRock’s recent initiative could lead to more TradFi institutions tokenizing assets on public blockchains rather than private ones. Morin referred to BlackRock’s $100 million tokenized “BUIDL” fund, launched on the Ethereum network on March 18. According to Dune data, BlackRock’s BUIDL fund currently holds over $382 million, making it the world’s largest tokenization fund.
In conclusion, while public blockchains still face limitations in handling high transaction volumes, there is an ongoing debate between proponents of public and private blockchains in the financial industry.