Templum, a security token startup, has decided to shift from public to private blockchains. According to the company’s February 25 announcement, enterprise software vendor Symbiont is building a private blockchain and smart contracts system that Templum will use for future security token offerings (STOs) by its clients.
According to Christopher Pallotta, the CEO of Templum, the company previously left the choice of blockchain protocol up to the issuers. This, however, posed problems to the company’s operations as many were choosing ERC-20 tokens that run on Ethereum. The network’s scaling problems meant that trading suffered in times of high transaction volumes, such as the peak of the CryptoKitties craze.
“A blockchain like public ethereum may slow down or stop capacity when you are in the middle of a million dollar or ten million dollar transaction,” said Vincent Molinari, the co-founder of Templum. He explained that public chains made it hard to meet regulatory standards, as the private-centric feature of these chains makes it impossible to know who your counterparties are.
Another concern the company had about the Ethereum network was the question of miners. Pallotta said that Templum wasn’t able to work around the legal concerns about whether ethereum miners would have to be registered as broker-dealers. He added that a private, controlled blockchain was necessary to issue securities, as the company needs to be in control of the “full lifecycle.”
Templum made headlines last year by offering investors “Aspen coins” representing shares in the St. Regis Aspen Resort. The company also tied up a deal with patent transaction platform IPwe to leverage liquidity from intellectual property. The Aspen tokens currently run on Securitize’s private DS protocol.
However, the idea of private blockchain has been a hot topic in the crypto community. While some have praised its ability to allow a company to have full control over a network and meet tough regulatory criteria, others have criticized its very core.
Bill Barhydt, CEO of cryptocurrency wallet and investing app Abra, said that the idea of private blockchains, such as enterprise blockchain platforms, will “eventually fail miserably.” During Fortune’s “Balancing The Ledger” show on February 25, Barhydt argued that the idea of a truly decentralized cryptocurrency contradicts the notion of private blockchains.