How JP Morgan is Transforming Banking with Blockchain & JPM Coin

Introduction

The innovation that blockchain has brought to the table has gotten the big players interested in imbibing the technology for the betterment of the previously used systems. One such example is how institutions like JP Morgan and Infosys are catering to services that are being developed by the same technology.

Given the rise in demand for the blockchain technology among the big players and how the whales have been busy with the acquiring of the big tokens, let us dive into the development of the payment system that JP Morgan is working on that has made use of the said technology and Ethereum. Yes, Ethereum.

JPMorgan’s Dive into Blockchain

The adoption of the blockchain technology has seen an interesting rise in demand in the last decade. Even more so for sectors like banking, finance, supply chain, education, and the enterprise world. Currently, within the finance-related sectors, two prominent private blockchain platforms are making the rounds: Corda, developed by R3, and Quorum, a creation of ConsenSys.

And JP Morgan has been at the forefront of it since 2015. The 7 years since then have been nothing short of various advances that they have embarked upon to strengthen the long game.

During this timeframe, several significant declarations have emerged, notably:

1. In 2016, their initial major revelation was the public announcement of their Ethereum-based enterprise fork, known as Quorum.
2. In 2020, they introduced the Onyx Digital Assets platform, a noteworthy development that has successfully managed more than $300 billion in intraday transactions, with a significant majority backed by government bonds.
3. In 2022, they embarked on DeFi transactions on the publicly accessible Polygon blockchain, collaborating with DBS Bank as an integral component of the Monetary Authority of Singapore’s Project Guardian initiative.

Corda holds a commanding position as the market leader in domains such as finance, insurance, and banking. Meanwhile, Quorum has established itself as a formidable competitor, leveraging its Ethereum-based features and capabilities.

Additional Read: Blockchain and AI Explained

What is Quorum?

If you soft fork Ethereum and create a private blockchain platform, Quorum will be it. Created at JP Morgan, one of the easily largest financial institutions in the world, Quorum retained some of the useful qualities of Ethereum.

Some of these enterprise friendly features are as mentioned below:

• privacy in the transactions taking place
• access via permission
• greater speed in transaction throughput

Being based on one of the original implications of Ethereum; Go Ethereum; and being an open source project, Quorum allows any developer to contribute. It has made it possible for enterprises or companies to create their own protected private networks on the Quorum ecosystem. As the channels being catered to are enterprises, this feature is of critical importance!

Having been based on Ethereum, Quorum has the advantage of using many of the useful features that come with Ethereum’s popularity and its massive adoption. One of the most basic examples for that is the language that is used for smart contract development on Quorum is the de facto programming language of choice on Ethereum; Solidity.

Thanks to the Ethereum platform’s popularity, many blockchain developers are already familiar with Solidity. So if a company is looking into implementing Quorum into their ecosystem, they will not face a lack of programming skills to access the platform The other major advantage that comes from this platform being based on Ethereum is its tokenization. Much like other private blockchains, Quorum empowers enterprises to establish their custom tokens and digital currencies. These tokens and coins, which originate from the Quorum platform, are seamlessly aligned with Ethereum’s universally recognized token standards, ensuring effortless interoperability.

How does Quorum work?

Having been built using Ethereum’s features and functioning on ETH’s language, Quorum portrays a lot of similarities when it comes to the functionality of the platform. However, there are a few additions to the platform that make it more suitable for enterprise usage:

• Permission: Quorum empowers users to establish networks protected by permissions, ensuring that only designated nodes can participate in the network.
• Enhanced Data Privacy: Unlike Ethereum, where transaction data is openly accessible, Quorum provides robust data privacy controls. Users can regulate data access, making it available to the public, exclusively to participating nodes on the private network, or to a selected subset of those participating nodes.
• Increased Transaction Speed: Quorum stands out for its superior transaction speed, often surpassing Ethereum’s performance. The transaction velocity on Quorum largely depends on factors such as the chosen consensus mechanism and network complexity. While Ethereum typically manages around 15 transactions per second, Quorum boasts the capability to process several hundred transactions within the same timeframe.

Due to Quorum’s versatility in accommodating private networks with different numbers of participating nodes and diverse technical configurations, that is pinpointing an exact Quorum-wide typical transaction speed can be challenging. Nevertheless, numerous use cases have reported achieving speeds of approximately 200 transactions per second, highlighting Quorum’s prowess in facilitating swift and efficient transactions.

What’s JPM Coin and How Does It Work?

JP Morgan’s Quorum blockchain platform created an impactful project in the form of JPM Coin. It is a digital currency that has been engineered to expedite cross-border transactions. JPM Coin derives its value from the reserve of US dollars securely maintained in JPMorgan’s accounts, ensuring its stability.

The JPM coin is currently not available publicly for purchasing purposes. The coin can only be used for B2B transfers by companies who hold USD deposits in JP Morgan bank accounts.

This digital currency can seamlessly transition into other crypto tokens or assets within the blockchain network. Presently, JPM Coin is undergoing rigorous testing among a handpicked clientele, aiming to enhance the swiftness, effectiveness, and safeguarding of global payment processes.

How JP Morgan Plans to Connect Payment Systems

Quorum emerges as an Ethereum variant with restricted access, originating from the collaborative efforts of JP Morgan alongside various financial entities. Its primary objective lies in delivering better scalability, privacy, and security tailored to the demands of enterprise-level applications.

In a parallel vein, JPM Coin takes center stage, engineered to streamline swift and secure transactions amid JP Morgan’s clientele.

Leveraging blockchain technology, this innovation undertakes the noble mission of curbing transaction expenses and hastening settlement times. It is imperative to clarify that JPM Coin does not qualify as a crypto but rather a stablecoin, tethered to the US dollar and substantiated by JP Morgan’s substantial reserves.

JP Morgan has intentions to try other ways of utilizing JPM Coin across additional markets and currencies in the future. Furthermore, the bank aims to delve into further applications of Quorum, they include:

• asset tokenization
• smart contract implementation
• engagement in the realm of decentralized finance.

This strategic move by JP Morgan signifies a momentous advancement in the adoption of blockchain technology within the banking sector. It serves as a compelling illustration of the various advantages as well as the hurdles that come with seamlessly integrating this pioneering technology into the already existing financial systems and operational processes.

JP Morgan: The Tech-Forward Bank

JP Morgan has been the pioneer in embracing the blockchain technology within its financial services. They are going strong with the experiments and one step at a time approach. Having been using the technology for the past 7 years, JP Morgan has been tapping into the space from various aspects and looking for an overall solution for their customers so as to the solution is the best in the market. However, one main obstacle for them in this market is Corda from R3. Both of these technologies have positioned themselves as experts in the finance related industries.

Umar Farooq, the head of blockchain research at JP Morgan, in a blog post, commented how the bank is working on leveraging its own blockchain platform, Quorum, in order to create solutions that is able to connect different payment networks and facilitate cross-border payments.

JP Morgan’s Quorum platform is the building ground for several innovative solutions, one of which is the Interbank Information Network (IIN). Comprising over 400 banks, IIN is dedicated to the seamless sharing of information and the facilitation of payment processes through blockchain technology.

The core mission of IIN is to work on the complexities and expenses that are associated with international transactions by promoting swifter and easier communication and authentication among its member banks. Furthermore, IIN empowers banks to engage in the exchange of vital data concerning sanction screening, regulatory compliance assessments, and the prevention of fraudulent activities.

Read More: Top Countries Leading in Blockchain Adoption

Conclusion

With a behemoth of the finance sector, such as JP Morgan taking up blockchain technology and its various applications as a part of the finance ecosystem to make it compatible with the future, it goes to show how these banks are embracing innovation and technology to better their services and operations. With JPM coin and IIN under its belt, JP Morgan is dedicated to working towards providing services to the community that are more efficient, cost-effective, and secure.