As JP Morgan Chase’s new blockchain lead, Christine Moy has big shoes to fill. And a quandary to resolve.

Moy took over last month from Amber Baldet, one of the most prominent figures in blockchain, after she left to form an as-yet-unnamed startup. Around the same time Baldet announced her departure, word leaked out that JP Morgan was considering a spin-out of Quorum, the ethereum-based, open-source project that had been the cornerstone of the bank’s blockchain work.

JP Morgan

To be clear, those deliberations do not mean Quorum is struggling – big corporates like JP Morgan tend to shelve failing projects, not spin them out into funded entities.

Indeed, it could be argued that Quorum may have become a victim of its own success. There are more than 20 organizations within the Enterprise Ethereum Alliance working group looking to build on top of the platform.

But for JP Morgan, the challenge is about allowing Quorum to flourish independently, in true open-source protocol style. Perhaps private blockchains, like their public counterparts, face difficult governance problems, too – especially once they start to gather a network effect.

Yet in an interview this week, Moy was quick to emphasize that the recent speculation around Quorum does not capture the breadth of JP Morgan’s work in distributed ledger technology (DLT).

She told CoinDesk:

“That’s not the most exciting part about our team’s agenda; it’s part of the story but it’s not, like, the story.”

And it’s true that JP Morgan is involved in a number of important blockchain projects that are separate from Quorum, such as its collaborations with Digital Asset Holdings, Axoni and Nivaura. Nevertheless, the fate of Quorum is the elephant in the room that will have to be addressed.

Fortunately for JP Morgan, in Moy it has a leader who not only knows that project inside and out but is all too familiar with the reasons the bank started exploring the tech to begin with.

Cross-trained for blockchain

Moy, the new program lead for the Blockchain Centre of Excellence (BCOE) at JP Morgan, brings to the role firsthand knowledge of exactly the kind of problems that distributed ledger technology aims to solve.

She started her career in the middle office of JP Morgan’s syndicated loans business. In this job, Moy had to deal with all the documents that needed to be signed before these transactions could close. Even more antiquated than most corners of legacy finance, syndicated loans can take 20 days to settle.

“I used to be the person that faxed those documents around to settle those trades, so I know that process intimately,” Moy said.

She then spent over a decade working across a range of assets and divisions at the bank. This cross-training included witnessing how securities and chains of custody were frozen solid as the 2008 crash engulfed the entire financial system.

That experience underscored for her the importance of a transparent system of reconciliation – just as the syndicated loans role drove home the need for faster settlements.

With that pedigree and perspective, Moy was a natural for the BCOE, where she was Baldet’s first hire.

Yet perhaps most importantly, working in various parts of a sprawling, diversified company – one assembled from decades of mergers – has shaped Moy’s thinking about one of the key challenges for DLT, particularly the private kind: interoperability.

“It doesn’t make sense to design blockchains to reflect the siloed operating models existing today,” she told CoinDesk, adding:

“Creating a fragmentation of small blockchain networks, without figuring out a way to enable interoperability or connectivity, is likely not the promised path to the cost savings and operational efficiency that enterprises are looking for.”

Open source, open mind

This, of course, brings up another delicate subject for a bank, particularly one whose CEO has famously bashed bitcoin: public blockchain networks.

Quorum, although built with open-source code, is a private blockchain, the kind that was in vogue a few years ago when enterprises (financial institutions in particular) were keen to experiment with the technology but wanted nothing to do with any cryptocurrency.

Lately, though, once-sharp lines have slowly started to blur. According to many ethereum advocates, we are only just at the dial-up internet stage of a totally new value transacting ecosystem. The end goal is connecting the private world of finance with public blockchains.

In an effort that was perhaps unthinkable a year ago, the EEA (which just published its architecture stack diagram) is actively building these bridges, along with the work of the Ethereum Foundation and also the help of a wide and populous developer community.

For her part, Moy said several times that she is “agnostic,” or neutral, about which blockchain or protocols are used. But she said it’s important to stay in touch with the innovation taking place in the public sphere.

“One of the important things for us working on an ethereum variant was kind of being able to stay close to that and potentially even being able to integrate some of that innovation and work into the stuff that we are doing,” she told CoinDesk, before musing:

“Maybe one day this will all converge.”

On the other hand, while she may be protocol-agnostic, Moy believes the basic building blocks for enterprise DLT are now all in place.

“The creation of new protocols in the enterprise space has largely subsided, and there are just a few key protocols that everyone broadly recognizes will remain,” she said.

Quorum quandary

Returning to Quorum, Moy views the project as an example of how open source software, once handed to the community, takes on a life of its own.

“We are entering this interesting point where other entities want to use Quorum, want to take it to production,” she said.

A whole host of entities picked up Quorum and started using it, Moy noted, name-checking IHS Markit, Broadridge, Synechron, ING, and BlockApps. The platform has amassed a tribal following.

“Quorum has strong momentum in capital markets,” said John Olesky, managing director at IHS Markit, a global financial data provider. “It benefits from the halo effect from JP Morgan and the technological rigor that comes from a global bank skilled in enterprise-strength software and compliance issues such as privacy.”

But this raises a problem, because it requires a level of support that’s only really possible if there’s a company dedicated to helping enterprises integrate the technology, the way Red Hat supports corporate Linux users. Businesses want someone they can call to fix bugs or when the network is down. Software support is not the bank’s business.

This is why JP Morgan is mulling over a spin-out. While reviewing its options, the bank is also looking at doing more investing internally and hiring more engineers, a spokeswoman said.

In the meantime, Moy’s focus is on bringing new business applications to Quorum, such as the testing of a debt issuance platform with a host of institutional investors.

Her team recently executed a $150 million Yankee certificate of deposit (denominated in U.S. dollars but issued by a foreign bank) in the form of an ERC-20 token on Quorum. (ERC-20 is the standard that launched countless initial coin offerings on the public ethereum blockchain.)

A smart contract automated the offering, the distribution and, crucially, the “delivery versus payment“- meaning the investors got their securities only upon paying cash. This is notable because cash is king in the world of clearing and settlement – and getting cash onto a shared ledger is seen as a vital part of the puzzle for blockchain builders.

Moy also sees the Yankee CD trial as a harbinger of a more open and transformed financial system.

“This is an example of us issuing a traditional financial instrument natively on the blockchain,” she said. “But the next phase is when you have real asset managers participating in a product like this; it’s about, what does custody look like? What does fund administration look like – and what does a trades market look like for something like this?”

Christine Moy photo by Jena Cumbo, via JP Morgan Chase.

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What do private blockchain builders really want?

According to JP Morgan blockchain lead Amber Baldet, they’re faced with the same concerns as anyone building public blockchains today.

JP Morgan

“These problems really aren’t so far apart, it’s just that people are trying to solve the problems in different ways,” Baldet told the audience at EthCC, an ethereum conference in Paris on Friday.

In a tightly packed lecture hall, Baldet laid out the mechanics of her company’s private blockchain network, Quorum, while seeking to put forth a broader message about how her bank, one of the largest globally, is looking to foster collaboration across blockchains.

And Baldet is in perhaps a unique position to advance the dialogue: not only is Quorum the first project that JP Morgan developed in its Blockchain Centre of Excellence (BCoE), it’s based on a fork of ethereum’s software. As such, Baldet spoke at length about how her time is spent engaging with cryptocurrency communities in an effort to find common ground.

“I spend a lot of time talking about ethereum and cryptocurrency and open blockchains to enterprises, businesses, central banks and corporates,” Baldet said, “I don’t spend a lot of time going the other direction.”

Yet, according to Baldet, these conversations are crucial to mutually educate and improve both sectors of the industry. While public and private blockchains are often pitched against each other, Baldet told CoinDesk in an interview, “I don’t think those two things need to be so different or are necessarily mutually exclusive.”

And while there are trade-offs with public blockchains that enterprises simply cannot afford, what businesses want from ethereum, and what ethereum wants in return, she said, is the ability to interoperate.

In this way, enterprises can inhabit their own private universes away from the public network, but publish data to gain the security and auditability of a public blockchain.

“It doesn’t necessarily have to be all enterprise disaster recovery systems over here, and all anti-fragile public blockchain anonymous transaction things over here,” she said.

Rather, Baldet continued:

“Pragmatically, it’s probably more likely that we’re going to end up with some kind of hybrid network of networks that can hopefully talk to each other.”

Building connectivity

And interoperability is an area in which Baldet feels businesses have typically failed.

In a refrain on how enterprise software tends to be complicated, fuzzy and proprietary, Baldet told the audience, “When we talk about enterprise blockchain, this is where people get stuck.” And, she believes, the impact of this is that businesses struggle to attract developer talent.

“[Developers] don’t necessarily want to work on something that looks like it was developed in the 1990s,” Baldet said.

As such, it’s down to businesses to cooperate along these lines to create simple, user-friendly software that can interact with existing tech, and work towards interoperability solutions such as Cosmos, Polkadot and Interledger that would allow blockchains to share data.

Elsewhere, Baldet has warned about what she has called “crypto-balkanization,” the splintering of blockchain communities into increasingly uncooperative factions, “virtual continents along political axes” that could “weaken privacy and make interoperability harder.”

Between the two extremes of distributed ledger projects and public blockchains like ethereum, there is a “fuzzy grey area in the middle” that Baldet has termed “mutualized infrastructure.”

A system like this would allow blockchains to communicate while meeting the requirements of different camps, and this, Baldet argued, is the best way to ensure an equal access to services in a fully-fledged internet of value.

She told the audience:

“We’re going to need to do a better job at making software work not exclusively for one group or the other which will continue to bifurcate those power structures, but to actually integrate these things together into one thing.”

Little private universes

Toward that goal, Baldet explained that Quorum and ethereum are purposefully alike, with as much as 95 percent of the software, in her estimation, being similar in both versions.

“It’s actually not changed that much, and that’s intentional, there’s very minimal modification,” Baldet said, during her talk.

Still, unlike the public ethereum blockchain, Quorum is meant to run in a permissioned setting, with every node in the network being identified via a public and private key pair.

Using these keys, smart contracts can be addressed to any node in the network, opening the possibility of private operations, the hash of which is then validated and stored on the Quorum blockchain.

But because of the privacy needs of businesses, or “being able to transact or transmit information without surrendering information ownership,” Baldet explained, there are other layers to the networks confidentiality as well.

Last year, Quorum coupled with privacy-centric cryptocurrency zcash, to integrate a layer of security layer of zero-knowledge cryptography on top of its blockchain.

Called the “zero-knowledge settlement layer,” this allows for zero-knowledge ethereum tokens that only reveal information such as transactional quantity and ownership, and that notably doesn’t reveal anything else about the function of the tokens.

And privacy is something that concerns Baldet in public blockchains as well.

“We could do a lot to reverse the aggregation and centralization and creation of data lakes, which over time, especially in a transparent public blockchain, are going to at some point become surveillance lakes,” Baldet told the audience, continuing:

“Figuring out a way to balance privacy with data transmission is critical. Not just for business but I think also for public endeavours.”

Feedback loops

But privacy is just one innovation that Baldet helped spearhead on public ethereum.

Another crucial exchange is the benefit that private blockchains could have for scalability, to stop the overburdening of the public blockchain by bringing certain projects off-chain. CryptoKitties, she reminded the audience, “didn’t work out well for anyone for a few days.”

In conversation with CoinDesk, Baldet elaborated, stating, “It’s not helping scale public ethereum by scaling public ethereum, but it’s taking some of the load off the network.”

By pegging itself closely to the platform and keeping up with its development, “Quorum benefits from all the security and scaling research happening on mainnet ethereum,” Baldet said, adding:

“Conversely, if someone is building an application that needs more processing power or more space than is efficient to run on the ethereum mainnet, they are starting to try it out on Quorum. The innovation goes both ways.”

Pending the release of new interoperability protocols, such projects can continue to interact and support each other for alternate, customized environments, “private environments on the side,” as Baldet named them, “their own little universe.”

And an interactive network of cooperative, public and private blockchains is close to ethereum’s vision.

At the launch of the Ethereum Enterprise Alliance last year, founder of ethereum Vitalik Buterin went so far as to call for collaboration between the open blockchain and businesses, stating, “we have shared challenges.”

Baldet explained:

“I don’t hear people say that they are ethereum maximalists such that they believe that no other computers should exist. That just wouldn’t make sense. So, the conversation has been more about how to transition to using this sort of technology.”

Amber Baldet image via Twitter

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