The blockchain was supposed to enable unrestricted participation, but that was overly daunting so the concept moved to a trusted consortium model. Now JP Morgan finds that equally daunting and will develop a private blockchain. Wouldn’t a cloud-based database be faster and more reliable?
To Mercator, the current status of blockchain development indicates that technologists have not yet determined how to rip the blockchain out of Bitcoin while retaining its positive attributes and eliminating its negatives. Instead, the favorite approach is to limit participation to trusted entities:
“ ‘This just shows the experimental stage blockchain and distributed ledger technology is at right now,’ observed Chris Skinner, chairman of the Financial Services Club, a networking group for senior executives in Europe. ‘There may well be multiple distributed ledger systems in financial services over the next decade. Then we will be working on interoperability and standards between ledgers. It reminds me of the old discussions of standards. ‘Sure, we got standards. Which one do you want?’
The original blockchain was created to track the movement of bitcoin, a digital currency, without the need to trust a centralized third party. The basic concept – a set of shared data that multiple connected parties agree on as valid – has been enthusiastically embraced by the financial services industry. Many bankers and technologists say it will help them handle things like securities trades, payments and contracts in a faster, simpler, more efficient and cheaper way than they do today.
But agreement as to exactly what that distributed ledger should look like does not yet exist.”
And that’s the rub. Mercator does not believe a general purpose blockchain can be built utilizing existing blockchain technology. Every use case will require a different set of replication rules (e.g. to keep PII data within a specific region), different access permissions, and potentially different support for correcting the ledger.
Until the use case is perfectly understood, the underlying blockchain technology simply can’t be properly designed. This would suggest that there will be multiple blockchains, one for each regulated use case. Linking these different implementations together will create a thorny nest of data protection problems and for information flow security leaks. As blockchains get smaller and more use case specific, it suggests that a time to market opportunity exists for traditional cloud-based solutions, assuming everyone stops staring at that shiny blockchain object. Since several blockchain pilots have been implemented on a single node operated in the cloud, why do we resist a traditional cloud-based solution? Traditional databases can become immutable ledgers by utilizing linked SHA-256, so what’s the holdup?
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
Read the full story here
