Banking experts are starting to look into cryptocurrency tech, and they are hedging their bets by finding uses for both the public blockchain models  like Bitcoin  and private models.

The word "blockchain" gets thrown around quite a bit as it's become a buzzword for the fintech and payments industry. But recently, Bitcoin theists have taken issue with associating blockchain to the private distributed ledger systems, such as Eris Industries and Hyperledger.

Instead, to this contingent, the blockchain refers to the public distributed ledger the Bitcoin protocol uses to record the growing list of bitcoin transaction data. The core concept for a digital cash system has been around for some time, but until the release of Bitcoin, many of these systems which relied on reputation suffered from Sybil attacks, where certain participants forge identities to subvert peer-to-peer systems.

Bitcoin's implementation is resistant from such attacks because it uses a proof of work algorithm where anonymous participants, called miners, that verify blocks must put forth a certain amount of computational processing power. Further incentive against harming the network or being deceptive, comes in the form of newly "issued" bitcoin that miners are rewarded when they verify a block using specialized computer hardware; plus individuals who invest tens of thousands of dollars into Bitcoin mining equipment are unlikely to try and destroy the network.

This distributed ledger concept has been privatized, although the companies that are developing these systems use a consensus algorithm instead of proof of work. These systems are controllable, repeatable, reversible and accountable, all features the financial services industry needs, harps Preston Byrne, chief operating officer and general counsel at Eris Industries.

But there is an ongoing debate among cryptocurrency enthusiasts over whether a private blockchain is a sustainable model and anything more than a traditional database.

Digital Asset Holdings, which launched in March headed by former JPMorgan Chase exec Blythe Masters, uses cryptocurrency technology to enhance the settlement and recording of financial assets. Masters is seen as a force to be reckoned with in the financial services industry and isn't taking bets on either cryptocurrency infrastructure play. Digital Asset Holdings acquired two companies in its few short months of existence: Bits of Proof, which built an enterprise-ready implementation of the Bitcoin protocol; and Hyperledger, which developed distributed ledger technology that allows financial institutions to run multiple private networks for managing assets.

"Banks are looking at multiple different systems...to offer in-house," said Dan O'Prey, founder and CEO of Hyperledger.

The teams at Digital Asset Holdings and Hyperledger have a very similar approach to the market, O'Prey said. Both companies want a platform-agnostic system that targets financial institutions and is pragmatic about where the distributed ledger technology is useful (unlike the initial Bitcoin craze that sought to put everything on a blockchain), he said.

While Bitcoin and private distributed ledger network providers seem to be in competition, O'Prey says the groups are addressing different problems and can coexist.

Bitcoin's censorship-resistant digital money model is well-suited for purposes such as funding a free press in countries where the government limits free speech. But it has also been used for illegal activities such as the purchase of drugs and weapons on black marketplaces, like Silk Road. These use cases aren't particularly appealing to the risk-averse financial services industry, which has been quick to pull support from controversial or legally questionable services.

"So far, venture capitalists aren't funding [censorship resistant models]," said Tim Swanson, an industry pundit that is currently a researcher at SKBI in Singapore and advises Hyperledger and a number of other blockchain startups.

Instead VCs have thrown a remarkable amount of money at Bitcoin-based startups building "censored" or regulated services for allowing consumers, merchants and financial institutions to interact with the Bitcoin blockchain. These include Coinbase, a Silicon Valley-based exchange, which has raised $105 million in venture capital since it's launch in 2012 and Circle Internet Financial, a consumer mobile wallet and merchant services platform, which has altogether raised $76 million.

"Private blockchain" companies haven't received funding close to the hundreds of millions of dollars raised by Bitcoin companies in the past few years, but the concept is still new. And many Bitcoin companies, such as Peernova hope to attract more VC interest by shifting their message to emphasize blockchain technology over specific uses of Bitcoin.

But these recent rebrands seem more like marketing and less like technological shifts at this point.

But Eris' Byrne insists that the Bitcoin community's narrow view of what a blockchain is limits the technology's potential.

"The magic of any blockchain is that it allows someone to easily deploy an interactive application, on the public Internet, that runs itself automatically, predictably and without human supervision or dedicated hardware," Byrne said. "Secure data infrastructure that doesn't require physical infrastructure is the game-changer here. And it's going to be much, much bigger than just digital money."

Rather than duplicate the economic incentives that Bitcoin offers to miners, Eris' technology allows known validators to come to a consensus on the state of a ledger, while also allowing an overseer to handle exceptions, remove bad actors and/or restore the ledger if it was falsified.

Traditionally, in database reconciliation, participants only have part of the copy of the global ledger, said Robert Sams, an industry pundit who writes at cryptonomics.org. With distributed consensus everyone comes to consensus on the global state of the ledger, said Sams, who is also the founder and CEO of Clearmatics, which applies distributed consensus technology to the over-the-counter derivatives market.

"Regulators are so interested in this because it could increase transparency," Sams said.

These private ledgers systems also differ from traditional databases in that they use digital signature cryptography for validation (much like Bitcoin does).

"If you look at blockchain as using cryptographic signatures to link the ledger from one point to the next, then the concept of a private blockchain makes perfect sense," Sams said. "If you think the distinguishing feature of blockchain is the use of proof of work or proof or stake to solve for a Sybil attack, then it doesn't make sense."

So the debate is largely semantic. And even private network providers, including Hyperledger and Ripple Labs, concede that they aren't really in the blockchain business.

Calling Ripple a blockchain company "is not technically correct but that's just the vernacular," said Chris Larsen, CEO of Ripple Labs, Inc. He likened the argument to Kleenex versus facial tissue. Kleenex, as a brand name, has become so prominent that many people use its name when referring to any brand of tissues.

Ripple doesn't require consensus nodes to carry the whole ledger of all transactions that ever happened. Instead, nodes only need to use the "last closed ledger" to come to agreement on the changes to the present ledger.

"'Blockchain' is used as a generic term for distributed ledgers...even though a lot of these ledgers don't have a blockchain," said Larsen.

Even with the hype around controlled distributed ledgers growing, the businesses that are publicly testing blockchain projects continue to use the Bitcoin protocol.

In May, the Nasdaq stock exchange announced plans to test Bitcoin's blockchain with its private markets platform, designed for firms planning initial public offerings (IPOs). Users will be able to link specific units of bitcoin to represent ownership and issue and transfer securities on the blockchain.

Barclays recently announced a proof of concept with Safello, a Stockholm-based Bitcoin exchange and recent Techstars accelerator graduate. Techstars powers Barclays' accelerator program.

While Bitcoin has been overshadowed as of late by private blockchain concepts, the attention is shifting back to Bitcoin, said Frank Schuil, CEO and co-founder of Safello.

Blockstream, which builds sidechains that are pegged to the Bitcoin blockchain, is Schuil's muse for the Barclays proposition. This could enable the use of a closed ledger system where users are verified and transact with each other and then moves to the Bitcoin blockchain to clear transactions.

This scheme could end up looking like Citigroup's new cryptocurrency, aptly named Citicoin, for cross-border payments. Banks could start deploying their own cryptocurrency networks, available only to their customers. These transactions would then be cleared over the Bitcoin network, which could lower costs for the banks and their customers, especially when dealing with international funds transfer.