Six months ago, Reuters revealed that JP Morgan might transfer its open source enterprise blockchain Quorum to ConsenSys. Today The Block cites unnamed sources saying there are advanced discussions involving JP Morgan investing $20 million in ConsenSys as part of a $50 million convertible debt deal. And ConsenSys would take over the maintenance and support of Ethereum based Quorum.
Oli Harris, JP Morgan’s Head of Digital Asset Strategy and Quorum, also jumped ship to Goldman Sachs just weeks ago, which may signal the deal’s advanced stage.
Joe Lubin founded ConsenSys and was one of the original backers of Ethereum. To date, the firm has been primarily funded using Lubin’s Ethereum wealth, but there have been several rounds of layoffs, including a 14% staff cut in April. A year earlier, ConsenSys was rumored to be looking to raise $200 million and restructured the firm, so it was less like a conglomerate.
The company now focuses on enterprise blockchain consulting and solutions and products for the public Ethereum blockchain.
ConsenSys has been involved in several high profile enterprise implementations that use Quorum. One is the LVMH AURA blockchain to authenticate luxury goods. For commodities, there’s the komgo trade finance network backed by ING, Citi, BNP Paribas, numerous other big banks, and Shell. Plus, the world’s largest agribusiness firms are working on the Covantis consortium with ConsenSys and Quorum.
However, one of the ConsenSys incubated projects was PegaSys, which initiated the open source enterprise blockchain Hyperledger Besu. If Quorum is taken over by ConsenSys, there must be some likelihood of a future rationalization of Quorum and Besu. Also, the Ethereum protocol is getting closer to its massive upgrade to version 2, which means the workload is likely to be intense.
From JP Morgan’s perspective, it doesn’t make sense for a bank to support third party companies that want to adopt Quorum, especially given many are not banks.
A possible alternative to ConsenSys to take on Quorum might have been EY which focuses on Ethereum, or even Microsoft. In the latter case, it may not have wished to back a single blockchain technology.
EY’s blockchain leader Paul Brody is a vocal supporter of public Ethereum over permissioned, which might not sit well with JP Morgan. All three – ConsenSys, EY and Microsoft – are working on the Baseline Protocol to encourage enterprises to adopt public Ethereum. Of the three, ConsenSys is the clearest match for supporting Quorum, barring its interest in Besu.
Plus, blockchain adoption requires collaboration amongst banks. Being so closely tied to one technology in some ways is an impediment to JP Morgan’s blockchain ambitions.
The bank is unlikely to move away from its existing projects that use Quorum. They include the Interbank Information Network (IIN), the messaging network for cross-border payments and its settlement coin JPM Coin. Three months ago, we noted 15 blockchain job postings by JP Morgan.