Headline:  JP Morgan has a system called Onyx.   What does this system do for investors in cryptocurrency?

Body:  JP Morgan has been around for a very long time.   Long enough to see many, many types of market conditions and practice reacting to novel types of investments.  So, it stands to reason that they might have a point of view to see the real value of (or lack thereof) cryptocurrency.  So, they developed a system called Onyx with the mission of helping their investors understand and invest intelligently in cryptocurrency.  So, I think it would behoove us to take a careful look at how it works, and we might learn a valuable thing or two.

What IS Onyx?

Onyx appears to be a payment system, that uses cryptocurrency as the measure of liquidity.  Said one of their experts, “Money is electronic today, but what is missing is programmability,” said the head of coin systems for JPMorgan. “That is the holy grail.”  Programmability suggests that this system will allow investors to structure a trade, and then say, execute this trade if and only if these certain market conditions exist.  Mind you, this is not a minor offshoot.   Onyx already has over 100 employees working full-time on it.

“We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business,” Takis Georgakopoulos said in a CNBC interview.

Are they all out to launch?

Well , yes.  The exciting thing here is that satellites are involved.  This speeds up settlement of international transactions greatly.  Before being announced, the system went thru 2 years of testing.   One of the first tests was to use the satellites to bounce information and consummate a simple transaction.  This was a necessary proof of concept.   The next set of tests asked what would happen if the connection to Earth was to be lost, temporarily.  Computers successfully bridged this issue.   Later, the tests were done using Low Earth Orbit (LEO) satellites which also consummated a transaction successfully.  This was very important because there was significantly less human interaction, suggesting the possibility for truly automated transactions, promising lower costs and much greater speeds.

Another thing that you would read about here is that Onyx represents a way to consummate transactions financially and integrate with the Internet of Things (IoT).  OK, a step back here is in order.   The IoT  is where the internet will plug into many of your devices.  For instance, your fridge cold e-mail you a shopping list, and (my favorite thing in the SkyMall) enable a toaster that will toast the forecast on to your, well, toast.  Now, even in the depths of winter, your outlook can be sunny, with a good possibility of bread.  Well, imagine if you could combine the sanctity of the blockchain with the amazing inventions around the house.  Now, when your bank account sees that your parents’ house was sold, it can immediately start your robotic vacuum in preparation of their arrival.  There are hundreds of less facetious (and less fun) examples, but this is one.

Are they encountering any challenges?

“One of the challenges in working with devices is the memory constraints.  This is amplified on a satellite because much of the memory is reserved as a backup for the satellite itself – not for running blockchain software. So we had to get creative to be able to generate the private keys for new accounts – typically a computationally heavy process.”  So, let’s take a step back here too.  We have spoken many times about the gargantuan power requirements for the cryptocurrency hacking rigs here on earth.  Well, in space, all that they usually have is a very inefficient solar panel to power the satellite.    This greatly limits the computational power too.   So, when on Earth, designers utilized a programming language (Rasberry Pi) known to be very efficient in power usage.

Who else is using these systems?

There is an argument to be made that commercial ventures could most benefit from the new systems that are available 24/7 and so easily pass currencies internationally.  In fact, Siemens is one of the earliest adopters and FedEx and Cargill are following closely behind.  One of the first early-adopter banks is the Bahrain-based Bank ABC, which is engaging in a “limited launch.”   (Remember, there is NO FREE Launch, right?)

The Verdict

Onyx appears to be here to stay.  Perhaps we can take some lessons from this semi-precious stone of a system.  Perhaps we can see how to most effectively use computing power to settle transactions quickly at much lower costs.   This alone would help the cryptocurrency space substantially.  And, J.P. Morgan has the power and size to make it back from a lot of mistakes.  Either way, make some popcorn, it’s going to be an interesting  ride.

REFERENCES

Onyx by J.P. Morgan launches blockchain in space (jpmorgan.com)

Bahrain’s Bank ABC using JPMorgan’s Onyx blockchain for cross-border payments (cointelegraph.com)

How JPMorgan is using blockchain to make B2B payments ‘programmable’ (yahoo.com)

JPMorgan Launches Blockchain Divison Onyx After JPM Coin Use (businessinsider.com)

 Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.