FinTech startup Chain guides financial firms into blockchain, cryptocurrencies

The discussions surrounding blockchain have largely focused on how it can be applied to traditional banking systems. But some startups are pushing the dialogue past what the distributed ledger technology can do for banks by discussing the possibilities of what blockchain can do for consumers and other FinTech firms.

Adam Ludwin, CEO, Chain (Money 20/20)

Adam Ludwin, CEO, Chain (Money 20/20)

One of the firms advancing the potential for future blockchain applications is Chain, a San Francisco-based technology company aiming to build and implement blockchain in order to move digital assets and create new financial products.

Chain CEO Adam Ludwin discussed the future of the company at Money20/20 conference session. Ludwin touched on blockchain’s impact on the financial services industry and the mainstream companies utilizing Chain for its blockchain expertise.

Blockchain baby
In the broader context of the financial services sector, blockchain remains in its infancy. It is neither capable of processing as many transactions per second as other methods, nor is it completely understood in the banking world. In fact, Ludwin took a moment to explain blockchain to unaware attendees at Money20/20, though it should be noted some find blockchain more appealing because of its decentralized model.

While it’s not quite where it needs to be, startups like Chain are tapping into the power of blockchain to create new, user-friendly products for consumers and financial service firms. Ludwin said the company has partnered with NASDAQ, Citigroup, Visa and Capital One. Chain aims to “overhaul the financial industry” and turn existing assets and currencies into digital assets.

“We’re not introducing a new cryptocurrency into the world,” Ludwin said. “Our idea is we want to digitize existing assets classes. We want to make U.S. dollars, Euros, [and] Starbucks points move with the same efficiency with the cryptographic, immutable transaction model — and therefore security — that bitcoins operate on.”

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Rather than instruct companies to upend their existing infrastructure and start over with blockchain, Chain creates tools for developers that make working with blockchain easier. This allows companies to collaborate and build new infrastructure alongside what they already use.

“One thing we don’t do is say, ‘Rip and replace everything you do with blockchain,’ because that would be too far,” Ludwin said. “Instead we work with our partners to find some or very little existing technology architecture. It’s a growth opportunity.”

Ludwin added Chain is “cultivating” relationships with several other firms. But as more companies warm up to blockchain, the ledger technology will likely continue to exist just outside of the mainstream financial services sector. Nevertheless, that’s how the platform is designed — to be outside of the traditional framework.

There still isn’t a general consensus among FinTech firms, traditional financial institutions and regulators as to how this technology should be used. It has yet to offer the necessary privacy protection to prevent company or consumer information from being leaked.

But privacy and consensus issues aside, the blockchain and the cryptocurrencies it supports are meant to be decentralized to avoid the cost and inefficiency issues plaguing existing financial companies.

“Bitcoin and Ethereum need to stay decentralized,” Ludwin said. “That is the premise and the point of their network. If you centralize it, you get into security issues. You get monopolistic pricing — all kinds of things that ultimately lead to poor user experiences.”

To keep the blockchain open and accessible, Chain recently released its open-source platform and five-year roadmap depicting where its technology is headed. Going forward, Ludwin said the startup will focus on “innovation around consensus and privacy and so on.”