“Blockchain without Bitcoin.” If there’s been one catchphrase that has taken hold in the FinTech world, it’s this one. Almost everyone – banks, tech companies, you name it – is excited about the underlying technology of Bitcoin but would rather ignore or reject the currency Bitcoin. The latest – and most substantial – entry in this category is the recently announced project by The Linux Foundation to build an open-source blockchain (sans Bitcoin). The Project includes a veritable who’s who of finance and tech companies: Accenture, ANZ Bank, Cisco, CLS, Credits, Deutsche Börse, Digital Asset Holdings, DTCC, Fujitsu, IC3, IBM, Intel, J.P. Morgan, London Stock Exchange Group, Mitsubishi UFJ Financial Group (MFUG), R3, State Street, SWIFT, VMware and Wells Fargo. Wired Magazine went so far as to say, “Tech and Banking Giants Ditch Bitcoin for Their Own Blockchain.” What remains to be seen is if you can successfully divorce the blockchain from an underlying currency such as Bitcoin.
Also read: Wall Street Determinedly Bullish on Bitcoin & Blockchain Technology
Bitcoin vs. the Blockchain?
The past year has seen rumblings from a number of quarters that companies want to build their own blockchains, but this project is clearly one of the most impressive. First, it is explicitly open-source. This is important, for closed-source projects are by definition not decentralized, since they require a central authority to make (secret) changes to the 
protocol. Second, it is not a solitary company creating this blockchain, but a consortium of companies. This at least is more decentralized than a single-organization blockchain. Of course, like other possible private blockchains, this one is still vaporware, so its feasibility is still an unknown.
What potential impact could The Linux Foundation’s potential blockchain have on Bitcoin? Many Bitcoin advocates have argued that financial organizations must adopt the Bitcoin blockchain eventually in order to remain relevant in the future, but The Linux Foundation project attempts to eliminate that dependence on Bitcoin by copying its most advanced technological feature, i.e., the blockchain. Others believe that you can’t really have a blockchain without Bitcoin. Venture capitalist Marc Andreesen, for example, tweeted soon after the Linux Foundation announcement:
Big companies desperately hoping for blockchain without Bitcoin is exactly like 1994: Can’t we please have online without Internet?? ?
— Marc Andreessen (@pmarca) December 18, 2015
The key difference between a private blockchain and the Bitcoin blockchain is incentives.
Incentives Make the Blockchain
Satoshi Nakamoto’s technological and economic insights in creating Bitcoin are widely recognized as astounding, but his understanding of sociology is also profoundly insightful. One of Bitcoin’s key strengths is its intrinsic incentives. People and organizations involved in Bitcoin – from miners to software developers to users – are directly incentivized to strengthen the blockchain. 
The most obvious example is miners: in exchange for their efforts to secure the network, they receive compensation in the form of bitcoins (the currency). Any action on their part to weaken the security of the network on their own behalf will result in the currency being devalued, and thus their own holdings losing value. Thus malicious action is deterred.
The incentives behind non-Bitcoin blockchains are an open question. Without the Bitcoin currency underlying the blockchain’s incentive structure, who will be motivated to secure the network? Most likely security will be managed in the same way as for any corporate database – with IT departments of the participating companies working together to update the core software, “mine” the blockchain, etc. This is a legitimate incentive program (after all, the IT employees are paid for their work), but it is not much different than how databases have been secured for decades, and is thus more susceptible to outsider attacks, and is far more centralized than a completely open network like Bitcoin.
Bitcoin’s Blockchain is Open to All
Andreesen’s analogy to the 1990’s Internet mentioned earlier is particularly apt: many large corporations wished to create their own “internets” which they controlled – CompuServe, AOL, etc. 
The idea of an “open Internet” – a shared system under no one organization’s control that all could participate in – was unheard of by, and unwelcome to, most of these large corporations. But the companies that didn’t embrace the more open system were doomed to failure (anyone still using CompuServe?), while those that adopted the open standard – many of which didn’t even exist in the mid-1990’s – have flourished.
The same could happen with Bitcoin. Private blockchains are attempts to maintain the status quo by legacy companies – to squeeze out less established (or not yet established) companies that might bring new ideas and services under a truly open system. Legacy FinTech companies recognize that a complete rejection of blockchain technology is likely to be their funeral, so they want to leverage its benefits without having a truly open system. But an open system – such as Bitcoin’s – enables the organizations and people with the best ideas to participate, no matter if they are a multi-national conglomerate or an entrepreneur with only a great idea and a garage to work in. A “blockchain without Bitcoin” could very well simply mean a blockchain for the status quo.
What do you think? Will private blockchains help or hurt Bitcoin? Let us know in the comments below!
Images courtesy Wikimedia Commons, The Linux Foundation, and pixabay
