Amber Baldet flings an oversize yellow die atop a display counter at a Best Buy near Times Square in Manhattan.
“It’s odd,” says Baldet. The outcome dictates her choice of laptop. Today she’s making all her decisions this way—a precaution intended to confound any trailing spies. Dressed in an army-green flannel shirt and black leather boots with studs, Baldet selects a $249 Lenovo computer, the “odd” designee, vs. a neighboring $169 “even” option.
“You sure you don’t want to roll again until you get the cheaper one?” asks Patrick Mylund Nielsen, her colleague. Negative. He whisks the box to a cashier.
On the mid-March Tuesday when this eccentric shopping trip takes place, Baldet is head of the blockchain program at JPMorgan Chase, the biggest bank in America and No. 20 on the Fortune 500. And Nielsen is lead engineer of the JPMorgan Chase–built blockchain Quorum, a distributed accounting ledger adapted from the technology behind the cryptocurrency network Ethereum.
The pair is taking off from work today … sort of. They’re planning to load data onto the laptop—a “burner,” literally to be incinerated—as part of a process aimed at upgrading the code behind Zcash, a cryptocurrency similar to Bitcoin except with significant privacy enhancements. Zcash enables anonymity, in theory, through mathematical techniques called “zero knowledge proofs.” To contribute their portion of the code for the proofs, Baldet and Nielsen must cook up a secret formula—and destroy the ingredients. If a bad actor compromised the data, the troublemaker could manufacture an infinite supply of Zcash, an inadmissable proposition.
“What are you going to use this for?” inquires a blue-shirted checkout clerk, scanning the package’s bar code.
“Doing one thing, and then we’re going to destroy it,” Nielsen deadpans. Any hint of grin is obscured under his chest-length thicket of beard. The sales rep, undeterred, continues his script. “Do you need an extended warranty, or Microsoft Office Suite?”
“Nope,” Nielsen says. “We’re going to destroy it.”
A crease forms on the salesman’s forehead. “Are you doing an experiment or something?” he probes.
“We’re going to smash it and then burn—”
“Yup! It’s for science,” Baldet chimes in. She hands the salesman a slip of paper bearing a QR code. “That’s what we’re working on, if you get bored you can look it up.”
The project is indeed a science experiment—not one typical of two ostensible Wall Streeters, but one that could benefit their employer. Indeed, JPMorgan Chase’s relationship with Zcash represents a very unusual alliance for a mainstream bank. The firm has incorporated the cryptography behind Zcash into Quorum, where one day it may shield transactions among banks from prying eyes. Along with Australia and New Zealand Banking Group and the Royal Bank of Canada, the financial titan in the fall formed an “interbank information network” to explore how to use Quorum to make global payments more efficient. Although the venture is in its early stages, JPMorgan Chase says the program, and others like it, could help reduce transaction-processing delays from weeks to hours; at the scale of the bank’s treasury-services business, which facilitates a staggering $6 trillion in payments per day, the technology could be a game changer.
But given the peculiar nature of the day’s task, Baldet and Nielsen are cautious about not overstepping the bank’s perceived boundaries. While leaving Best Buy, Baldet emphasizes to me that she doesn’t want this cryptoconjuring expedition to reflect on JPMorgan Chase in any way. “Just make clear we’re doing this in a personal capacity,” she insists.
“They think we’re batshit crazy.”
Based on his denunciations of Bitcoin, JPMorgan Chase CEO Jamie Dimon might seem like the last person on earth who would employ Baldet and Nielsen. His criticisms have commanded headlines and earned him demonization (sometimes literally, in the form of the nickname “Jamie Demon”) on cryptocentric blogs. Speaking at Fortune’s Global Forum in San Francisco in November 2015, Dimon predicted that governments would crack down on ungoverned moneys: “You’re wasting your time with Bitcoin,” he asserted. Last September, as Bitcoin prices began a run-up to near-$20,000 highs, Dimon reiterated his skepticism. “Bitcoin is a fraud,” he said, promising to fire any employees who traded it. A month later, he added, “If you’re stupid enough to buy it, you’ll pay the price for it one day.”
2017 Company Profile: JPMorgan Chase
|$113.9 Billion||$24.4 Billion|
|Employees||Total return to shareholders|
|*Total Return to Shareholders assumes the 2007–2017 Annual Rate.|
Dimon later said he regretted airing his opinion. But as a man who runs a financial behemoth that handles a quarter of the U.S. dollar supply on any given day, Dimon has good reason to be cynical about an asset class that defies governance and whose price fluctuates wildly and without warning. Yes, JPMorgan Chase employs more than 50,000 technologists—almost twice the total number of employees at Facebook. But compared with the bank’s many mission-critical tech operations—functions that sustain the flow of value that lets businesses and consumers get paid, take out loans, and invest in new endeavors—cryptocurrency can seem like both a financial pip-squeak and a distracting sideshow. Still, behind Dimon’s public dismissals lies a subtler truth about the bank’s relationship to cryptocurrencies, blockchains, and their enticing if still unrealized potential.
“We actually use it. It’ll be useful in a lot of different ways. God bless the blockchain.”
Jamie Dimon: CEO, JPMorgan Chase
On the heels of Dimon’s blunt October rejection, Adam Ludwin, CEO of Chain, a Nasdaq- and Visa-backed startup building blockchains for the financial industry, addressed an open letter to Dimon elucidating the potential value of cryptotechnologies. The piece racked up nearly half a million reads, and promptly crossed the desk of Dimon, who arranged a call with his interlocutor. “He could have easily said, you know, how dare you use my name as clickbait, but instead his perspective was that he appreciated the note and the thinking in it,” Ludwin recalls of their conversation. “I was, in turn, impressed that he took it seriously.”
Indeed, as down as Dimon may seem on cryptocoins, he has lavished praise on the technology undergirding them. “God bless the blockchain,” he said last year, at the same conference where he questioned the intelligence of Bitcoin buyers. And he has given employees a long leash to work on experimental technologies drawn from the freewheeling cryptocurrency world, with far greater autonomy than most banks have conferred.
Quorum, for instance, is a derivation of a software client that uses the Google-conceived programming language Go. When the cryptocommunity makes improvements to Ethereum, the second-largest cryptocurrency network by market value after Bitcoin, JPMorgan Chase’s blockchain crew can piggyback on those updates. Similarly, Quorum’s “zero-knowledge security layer,” which enables transactions involving digital tokens, was built in collaboration with the Zerocoin Electric Coin Co., makers of Zcash.
When Dimon’s “fraud” comment lit up social media, Amber Baldet retweeted coverage with her take: “¯_(ツ)_/¯,” the unflappable shrug emoji, iconic among a generation weaned on the web. At last fall’s Money 20/20 fintech conference, she offered a more nuanced response. “For most other banks it probably makes sense to stand up and say, ‘Blockchain good, Bitcoin bad,’ because you can completely draw a hard line between the two. Given the activity that JPMorgan has had both with Ethereum and with the folks who created Zcash … it’s less sensical.”
Multinational corporations are sprawling organizations—collections of independent thinkers who encompass a diversity of dreads and dreams. The beliefs of their top officers don’t always match, or neatly summarize, the sentiments within. And in JPMorgan Chase’s blockchain efforts, a financial giant’s cautious, bottom-line-oriented leadership has coexisted, often fruitfully, with the entrepreneurial, anarchic energies of a new technology’s architects.
In truth, the bank has made enormous strides in blurring the lines between public blockchains—the Wild West world of cryptocurrencies—and business-friendly private or “permissioned” blockchains, the building blocks of future efficient financial infrastructures. As these technologies mature, their ascendance may owe a lot to the kinds of odd-couple relationships that linked Dimon and Baldet.
In February 2015, an unusual job listing appeared on JPMorgan Chase’s website. “You care about disruption,” the description read, in part. “You have an opinion on Bitcoin and other cryptocurrencies, and you are probably ambivalent about the prospect of working for a large financial institution.” As the Wall Street Journal characterized the self-deprecation at the time: “They need people who aren’t eager to work for them.”
JPMorgan Chase wanted fresh blood—a desire known to many a century-old institution in days of technologic upheaval. To tap it, the bank created a skunkworks in 2014 called New Products Development. The team pursued the buzziest topics, including cloud computing, digitization, and developer-friendly programming interfaces—and it’s where Amber Baldet eventually landed.
Baldet was an unlikely banker from the start. She has long had an affinity for counterculture and hung around hacker circles. She moved to New York in 2008, taking a job at a boutique hedge fund just as the firm—and the economy—unwound. She later joined a consultancy, Capco, where she did work for JPMorgan Chase before moving there full-time in 2012. Her rebelliousness persisted; during Occupy Wall Street, she posed for a portrait by Molly Crabapple, an activist-artist known for depicting life at Guantánamo Bay. In the scene, Baldet wears shades and leans on a sign that reads, “Wall Street workers for realistic fiscal reform. There are more of us than you think.” It now hangs at the New York Historical Society.
At JPMorgan Chase, Baldet found her way to New Products Development, working at first on machine learning. As enthusiasm for enterprise blockchains surged, the group doubled down on strategic investments in such projects. The company pumped funds into Digital Asset, a startup helmed by Blythe Masters, a former JPMorgan Chase executive credited, controversially, with inventing the credit default swap. The bank was a founding member of the Enterprise Ethereum Alliance, a consortium of businesses exploring that technology, as well as of the Linux Foundation’s cross-industry blockchain collaboration group, later dubbed Hyperledger.
“For most other banks it makes sense to stand up and say, ‘blockchain good, Bitcoin bad.'”
Amber Baldet, former JPMorgan Chase blockchain leader
Concurrently, the bank went further still, building its own technology in-house. It soon became clear, however, that the compliance-conscious culture of the bank wouldn’t be a seamless fit with the share-everything ethos of blockchain tinkerers. In recent years, JPMorgan Chase’s blockchain experiments have been promising; keeping their creators in the fold has proved challenging.
Among the first test cases was a distributed ledger known as Juno. Blockchain systems often tucker out under heavy use; Juno was designed to make them more resilient. Technologist Stuart Popejoy led the project’s development with his main coder, Will Martino. What they were doing was so new to JPMorgan Chase, however, that the bank had little experience with releasing open-source software to fall back on. (Martino wound up releasing Juno’s code under his personal account on Github, a code-sharing website.) When the team unveiled Juno at a Hyperledger meeting in 2016, JPMorgan Chase declined to issue a press release about it. “It became clear to us if we really wanted to realize the potential of this technology, we needed to go out on our own,” Popejoy told Fortune. They left the bank that year; their new project, Kadena, has raised nearly $15 million, and the founders say they’ve signed on a Fortune 100 health care company as a client.
By then, Baldet had become the de facto leader of the product team’s blockchain efforts. Her first hire was Christine Moy, a former securities trader who worked for a stint under Masters. They were eventually joined by Patrick Nielsen, a former researcher at Kaspersky Lab, the lately embattled Russian antivirus maker; eventually, Nielsen became the lead developer on Quorum.
Over time, Quorum began to resemble a blockchain that mainstream financial-service providers could rally behind. Its ease of use and its private messaging tool, Constellation, meant it could provide confidentiality that would be table stakes for many banking clients. And its forward-looking zero knowledge security layer promised to bring more value—privately settling digital asset swaps—in the future. JPMorgan Chase’s regulatory regime, meanwhile, had grown to embrace new-product culture: By the time the group was ready to release Quorum under an open-source software license, it could do so in a way that met compliance, and the bank released it under an official Github account for JPMorgan Chase.
“They were early to experimentation with what other banks would have viewed as untouchable technologies,” says Chain’s Ludwin, referring to Ethereum and Zcash. “I give Amber a lot of credit for that, and also [credit] Jamie for enabling that.”
Still, Quorum’s adoption and even its future at JPMorgan Chase are far from assured. Because Quorum is open-source, the bank must carefully navigate antitrust regulations, since such collaborative efforts involve coordinating with other banks. For that reason and others, industry insiders have speculated that Quorum would be better off overseen by a group like Hyperledger or a financial-industry consortium, like FINOS. Lori Beer, JPMorgan Chase’s chief information officer, says its fate is yet to be decided. “We believe it’s a really fantastic asset,” Beer says. “We’ll continue to assess what is the best approach to evolve and grow Quorum.”
That evolution won’t take place under Baldet and Nielsen, however; in April, they announced their resignation. “We simply wanted to move more quickly than was really possible at a highly regulated entity,” Baldet says.
Baldet and Nielsen envision a world, not far off, where permissioned (business-ready) and public (Bitcoin-like) blockchains are joined much more closely. Baldet compares the state of blockchains today to the period a few years ago when corporations were weighing using public clouds such as Amazon Web Services or Microsoft’s Azure. Eventually, they settled on hybrid architectures that include both private and public clouds, enabling more resilient, efficient ways of doing business. (Christine Moy, who succeeded Baldet as head of the JPMorgan Chase team, sees the blockchain world similarly; she recently told the website Coindesk, “Maybe someday this will all converge.”) That’s part of Baldet’s and Nielsen’s impetus to found Clovyr, their new startup, which takes its name from the cloverleaf infrastructure of highway on-ramps and off-ramps.
Clovyr will serve blockchain-curious developers, businesses, and consumers. Baldet’s product ideas include a browserlike tool for desktops to help users plug into competing blockchains and play with decentralized apps, in order to experiment with the latest innovations. Nielsen has started writing preliminary code, and the company has begun fundraising. There doesn’t have to be one winner in the blockchain race, in their view. Businesses and people—including Jamie Dimon—should be able to cobble together whatever pipes and component parts work best for them.
But before Clovyr’s mid-May launch, Baldet and Nielsen have one last task to complete to benefit Quorum and JPMorgan Chase, in an event I’ve come to Baldet’s Brooklyn apartment to witness. Her cat, Lily, prances around the living room and mews while the duo dismantle a laptop—the last stage of the Zcash code-contribution ceremony.
The day prior, the duo had conducted video-recorded interviews in New York’s Times Square and Union Square, using huge umbrellas to block eyes-in-the-sky from snooping. They interviewed a Canadian couple, an Israeli actor smoking a spliff, and a Buddhist monk, among others, for their thoughts on privacy, cryptocurrency, and surveillance. They caught footage of pigeons flapping around parks, taxis honking, and a Jamaican lady yelling an obscenity at them on the subway. The goal was to generate data in the form of a video file that would be impossible for anyone to reproduce, and then to feed that video into a program that converted it into foundational code for the privacy tech at the heart of Zcash.
With that work completed, it’s time for destruction. On Baldet’s rooftop, she whips out a propane blowtorch and melts the computer’s innards, taking special care to incinerate the memory chips. An acrid miasma emanates from the pan in which the detritus sits. “We’re making a nice PCB stew,” Baldet says.
Back in her kitchen, Nielsen identifies an insufficiently demolished piece of the computer. Baldet places it in a pan on her stovetop. She turns on a range-hood vent, and lets the flame rip—frying the metal and plastic bits. She and Nielsen waft smoke through the exhaust fan. A faint white cloud escapes heavenward. And thus the ritual concludes.
This article originally appeared in the June 1, 2018 issue of Fortune.