JPMorgan Chase is developing a new cryptocurrency called JPM Coin whose value will be tied to the US dollar, the bank said on Thursday. The new private blockchain platform is designed to help large JPMorgan clients move money around the world. The new cryptocurrency will be built atop JPMorgan's Quorum blockchain technology, a variant of Ethereum that has been modified to serve the needs of a major financial institution like JPMorgan.

The Ethereum network is public and open to anyone; Quorum is a private blockchain where a network owner can control who has access. All transactions on the Ethereum network are visible to everyone on the network. In contrast, nodes in the Quorum network can create encrypted transactions (and smart contracts) that are only visible to parties to the transaction.

Quorum also jettisons the wasteful proof-of-work algorithm that secures the Ethereum network in favor of a simpler scheme that relies on majority voting among network nodes. Public blockchain networks like Ethereum use proof-of-work algorithms to guard against Sybil attacks, in which someone tries to take over a network by creating a lot of zombie nodes. But Sybil attacks aren't a concern in a permissioned blockchain like Quorum, because each node is tied to a real-world identity that has been vetted by the network owner.

The Ethereum network's throughput is limited to roughly 15 to 20 transactions per second. Quorum improves on this by at least an order of magnitude, comfortably handling hundreds of transactions per second. And of course the JPM Coin network will only be available to selected JPMorgan customers, so there's no worry about it being overrun by cryptokitties or other blockchain fads. The network should be able to comfortably handle customer demand for the foreseeable future.

The value of bitcoins and Ethereum's ether float on the open market. In contrast, JPMorgan will guarantee that each JPM Coin can be redeemed for $1. While the system will initially be based on Quorum, JPMorgan says it will eventually be extended to other blockchain networks.

So what?

So what's the point of all this? JPMorgan helps its bigger customers move large amounts of money around the world every day—either from one customer to another or from one subsidiary of a corporate conglomerate to another. As CNBC points out, international payments are often done using old-fashioned payment networks like Swift that can take a day or more to clear. In contrast, the Quorum network can clear transactions in a matter of seconds.

There's also the potential to expand this system to other types of transactions. The system is flexible enough to have JPM Coins denominated in euros, yen, or other major currencies. There's also the possibility that it could be used to facilitate the sale and transfer of other assets, like stocks or bonds.

For now, ordinary retail customers of JPMorgan won't have access to the JPM Coin network, which is intended for business-to-business transactions. But in the long run, the network could theoretically become the foundation for new consumer payment services—though that might require a significant overhaul of the network's architecture to support higher throughput.

"The applications are frankly quite endless," JPMorgan's Umar Farooq told CNBC. "Anything where you have a distributed ledger which involves corporations or institutions can use this."

A big unanswered question here is what value is added by doing this as a blockchain network rather than a conventional database running on JPMorgan servers. The selling point of a conventional blockchain network like bitcoin or Ethereum is that it's open for anyone to participate and therefore can enable cooperation among people who don't otherwise trust each other.

But JPM Coin is only going to be open to JPMorgan customers. And two parties who are both JPMorgan customers can already rely on JPMorgan as a trusted intermediary for any financial transactions they might want to undertake. So it's not clear how using a blockchain is helpful.