You and I can’t predict whether private and consortium based distributed ledgers or public blockchains will win over enterprise adoption, or whether the outcome will even be so binary. There are sound arguments to be made both for and against the two.

The technology is still maturing while the industry continues to rapidly change. Just 3 years ago Ethereum was but a twinkle in Vitalik’s eye and Dogecoin was the hippest altcoin out there. Now we have major enterprises entering the space trying to develop a superior ledger that will rule them all. Such is the case with the progression of disruptive technologies. We can’t know what the ecosystem will look like 2 years from now and there is little point in trying to since we’ll all likely be wrong.

It is vital for enterprises to assume an adaptive but hands-on blockchain strategy. Financial institutions need to start working with existing and functioning blockchain protocols so that they can develop the internal capabilities that position them to take advantage of a world where value is transferred over a blockchain.

In Clayton M. Christensen’s book, “The Innovators Dilemma”, he outlines how large incumbents have historically failed to become early adopters of disruptive technologies because the technology initially underperformed existing alternatives, the market size was too small, and there was no demand for the new technology among their existing customers.

This is the current state of affairs in the public blockchain space. Bitcoin and Ethereum aren’t able to solve most of the issues being raised within capital markets, bank’s most profitable customers are not the biggest buyers or users of Ethereum and Bitcoin, and the existing fringe user-base is too small for large enterprises to consider worthwhile. This explains why managers are often referenced as saying ‘we like blockchain, but not bitcoin’.

Unfortunately, the private blockchains being referenced still have a ways to go before many of the hypothesized applications come to fruition. In the interim, financial institutions have an opportunity to establish some foundational capabilities, starting with becoming blockchain transactional, and to start working with existing protocols. The public blockchain ecosystem is currently the only existing market while private blockchains remain, somewhat, an academic exercise.

In order for enterprises to emerge as early adopters, they will have to start getting their feet wet with the technology that started it all — Bitcoin — and what’s currently driving a lot of the innovation in the space — Ethereum. This means embracing proof of concepts that involve these two protocols and being able, as an organization with thousands of employees, to buy, sell, and manage blockchain-enable assets that live on public protocols.

The skills and experience of attaining these capabilities will put financial organizations in a position to start adopting and testing future use-cases, whether they are with private or public blockchains. Managers should heed the warnings laid out by Christensen and stop avoiding the existing but fringe market that is Bitcoin and Ethereum. Enterprises must find existing opportunities within these markets, whether they are storing tokens for your clients or facilitating their purchase. Developing the necessary capabilities of managing blockchain-enable assets puts you one step closer to becoming the disrupter, and not the disrupted. If you’re interested in discussing how your organization can become blockchain-ready, drop us a line.