Several multi-billion dollar banks including Goldman Sachs, Santander and Morgan Stanley have officially left the R3 blockchain consortium, an organization established by R3CEV to focus on the development of industry standard blockchain-based systems.
R3 CEV Shake Up Sees Member Banks Leave Consortium
A few days after Goldman Sachs’ bailout was announced, internal sources close to R3CEV revealed in a leak sent to Epiphyte CEO Edan Yago that JP Morgan, Macquarie Group, US Bancorp and National Australia have also opted out in the upcoming fundraising initiative of R3, solidifying their stance on R3 blockchain development.
As the founding members of the consortium, these 7 banks have made significant contributions in the development of R3 and its existing blockchain-based systems like Corda. In spite of the absence of Goldman Sachs and other major banks, R3 still secured US$ 56.5 million in its latest fundraising initiative to fund its operations throughout 2017.
Big Funding, No Working Product
Respected cryptographers and bitcoin investors including Bitcoin Core developer Peter Todd and DCG CEO Barry Silbert heavily criticized the R3 consortium in the past week, primarily due to their inability to evaluate criticisms, impractical approach to open source technologies and failure to present successful cases of their systems.
Over the past two years, the R3 consortium received hundreds of millions of dollars in funding to finance its operations. Yet, the organization’s technologies including the R3 Corda are yet to be integrated into any one of its member bank’s financial platforms or networks, suggesting its limitation in applicability and flexibility.
More importantly, Peter Todd recently emphasized that R3 refused to open source Corda, completely contradicting its previous announcement on October 20. During a Reuters exclusive interview, executives from the R3 consortium stated that the organization intended to develop Corda as an open source blockchain platform.
R3’s chief engineer, James Carlyle further stated: “We want other banks and other parties to innovate with products that sit on top of the platform, but we don’t want everyone to create their own platform … because we’ll end up with lots of islands that can’t talk to each other.” In the same interview, R3 CEO David Rutter also noted that he wanted to prevent banks from “blindly investing millions of dollars in small, disparate technology projects.”
Furthermore, Peter Todd confirmed on November 25 that R3 vetoed one of its member banks from hiring him to carry out a thorough review process and evaluation of Corda. Todd went on to explain that R3 is allergic to criticisms, claiming that he received a cease and desist letter.
However, James Lambert, an associate at R3, announced on November 25 that the R3’s Corda platform would be open-sourced under the Apache 2 license from November 30.
“We will, of course, also be developing a commercial version of Corda for those who need specific enterprise features and support, but the open source codebase is the foundation of everything we do,” said Lambert.
Expert Criticism From Core Bitcoin Engineer
After Corda was open sourced, developers like Todd looked closely into the code and formed a simple conclusion:
It’d be risky to deploy Corda in production right now, as there aren’t clear definitions of what the consensus parts of it actually do.
— Peter Todd (@petertoddbtc) November 30, 2016
Todd went on further to criticize the lack of transparency in the Corda network as well as its unnecessary complexity that has made the blockchain network more difficult to guarantee high security measures. Todd noted:
Not once do the Corda docs talk about who actually is supposed to have access to keys; whole point of crypto is to know who did what!
— Peter Todd (@petertoddbtc) November 30, 2016
Possibility of More Banks Leaving
According to Epiphyte CEO Edan Yago, there exists a strong possibility that more banks may leave the R3 consortium. He also stated that R3 was seeking $150 million but as mentioned above, the organization only secured nearly 33% of their initial investment plan.
“Sources inside of R3 have told me that they or others are considering leaving. Overall sense of pessimism. Others still optimistic,” Yago stated.
What do you think about the recent events surrounding the R3 CEV project? Let us know in the comments below.
Image Sources: Shutterstock, New Yorker
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