In the past month, there have been a number of major announcements regarding banks and blockchains. Twenty-two major banks announced that they are partnering with consulting company R3 to experiment with blockchains, and Chain announced a new round of funding and is now claiming that “a blockchain is more than a technology, it is a strategy.” The natural questions following this news, particularly as the price of bitcoin hovers around $240, are “What do banks mean by ‘blockchain?’” and “What does this mean for Bitcoin?”

What do banks mean by “blockchain”?

For those who have been interested in Bitcoin for a while, it’s a little strange that people are now talking about a blockchain being a “strategy.” After all, isn’t the technology why we’re all here? Satoshi’s major technological breakthrough was the Bitcoin blockchain, a secure public ledger that is inclusive and permissionless, allowing anyone in the world to transfer value, miners to validate blocks, and developers to build apps and store data. The reality right now, though, is that most banks aren’t talking about this technology breakthrough when talking about “blockchain.” It’s too disruptive to most banks, which have existing business models and profits to protect. What most banks are talking about when discussing “blockchain strategy” is a shared database that could have been built long before Bitcoin existed.

The momentum of Bitcoin over the past few years has forced banks, which have had massive power and profits for 50+ years, to start thinking more seriously about their antiquated technology stacks. The “blockchain technology” experiments will be the entry points for many banks. Some of the initial experiments will probably be with private blockchains that enable non-payments use cases, such as securities clearing and settlement. A replicated, shared database controlled by 22 companies is not a technological breakthrough, but it is a step in the right direction for large organizations that haven’t experienced much innovation in 50 years.

What does this mean for Bitcoin?

The breakthrough technology is the distributed public ledger that’s not owned by anyone and can be used by anyone. While blockchain experiments by banks could lead to more efficient processes and cost savings, the blockchain that will have the biggest impact on the world by many orders of magnitude will be the blockchain that anyone can use. These blockchain experiments are likely to serve as a Bayesian updating mechanism for banks and will help them understand the power of a global public ledger faster than they otherwise would have.

Over time, it’s likely that users, developers and ultimately institutions will gravitate towards the blockchain that is most secure and accessible. We’ve already seen some protocols move from less secure blockchains to the Bitcoin blockchain, and this is likely to continue. But this will take time, and there is a lot of work to be done on both the Bitcoin protocol (to enable more transactions per block and more sophisticated scripts) and at the infrastructure and application layers (to make Bitcoin easier to use and useful).

In the short-run the bank private blockchain noise is slightly confusing. But in the long-run, these experiments are likely to be positive for the ecosystem and accelerate adoption by exposing more people inside banks to these concepts. Ultimately, the disruptive nature of the Bitcoin blockchain will be clear to all. Next time you find yourself thinking about the Bitcoin blockchain and private blockchains, read some Clay Christensen.