- Citi’s innovative Citi Token Service: Facilitating seamless global transactions.
- The limitations of private blockchains: Lessons from internet protocol history.
- The potential dominance of public blockchains and their advantages.
Citibank has unveiled the Citi Token Service, a strategic move aimed at integrating blockchain technology into institutional operations.
The Citi Token Service facilitates the tokenization of client deposits, enabling instant cross-border transactions. It also leverages smart contracts to automate trade processes, a successful trial of which was conducted in collaboration with shipping giant Maersk.
This launch underscores the ongoing interest in the practical applications of blockchain technology, as the speculative hype of previous years has subsided. Research firm Bernstein predicts that over the next five years, approximately $5 trillion worth of real-world financial assets will be tokenized on blockchain platforms, prompting numerous banks to vie for a piece of the action.
A Promising Concept Hindered by Private Blockchains
While Citi’s initiative is commendable and a legitimate way to harness the potential of blockchain technology, its implementation on private blockchains is inherently limited and ultimately futile.
To comprehend this limitation, we must take a brief journey back in time to the early days of the internet.
During its nascent stages, a multitude of computer network protocols, such as ARPANET, X.25, DECnet, and others, proliferated. However, none of these protocols remain relevant today, as TCP/IP emerged as the dominant and enduring standard.
What set TCP/IP apart and enabled its triumph?
Open Standards: TCP/IP was based on open, non-proprietary, and well-documented standards.
Robustness: It was designed to be fault-tolerant, ensuring seamless communication even in the event of network disruptions.
End-to-End Communication: The intelligence and state were decentralized, simplifying the network architecture and enhancing resilience.
Scalability: TCP/IP was built with scalability in mind, adapting as transaction volumes expanded.
While its adoption by the U.S. Department of Defense certainly contributed to its success, the fundamental point remains: TCP/IP prevailed because it was open, interoperable, robust, and scalable—qualities distinctly absent in private proprietary blockchains.
Distinguishing Private and Public Blockchains
While the distinction between private and public blockchains is evident from their names, those seeking a more comprehensive explanation can refer to this guide.
In hindsight, history may reveal that the BSV blockchain, possessing characteristics similar to TCP/IP, will emerge as the dominant protocol. Hence, entities like Citi would be better served by constructing their applications on the original Bitcoin platform today.
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