How do consortiums/private Blockchains affect Bitcoin? Financial institutions are trying different ways of approaching Bitcoin’s blockchain. These technologies could be applied to our financial system by 2020.
We are witnessing the development of Bitcoin and other cryptocurrencies known as alternatives. The path has certain obstacles, and the banking system tries to eliminate any possible dangers.
Why Bitcoin cannot be used by financial institutions
In 2015 we have seen a many articles regarding the issue of public vs. private blockchain.
The main argument as to why Bitcoin could not be used by financial institutions is down to the number transactions which could be done per second. Bitcoin’s blockchain network is only capable of processing about six or seven transactions a second. In contrast, Visa has the capacity to process 65,000 per second.
Thunder, Chain and R3CEV are about to change the game
Blockchain released another code on 16 May 2016 called Thunder which has the potential to facilitate secure, trustless, and instant payments, at a scale of 100,000 transactions per second.
Bitcoin startup company Chain on 02 May 2016 announced the Chain Open Standard 1 (Chain OS 1), which is an open source blockchain protocol. This will be controlled by financial corporations.
Previously efforts have been made by the R3CEV, which includes 43 global banks. They have released a distributed ledger system for financial services called Corda, aiming to have strong digital identity, as they will pass AML/KYC.
Blockchain to enhance data systems
Many companies are trying to win this race, and always we have to remember the reason why Bitcoin’s blockchain is important. It is created by mining procedure, not only by the transactions alone.
Another company offers a different path. ChainReactor is a new startup company created by a former banking member Jon Nelson. He is focused on using Blockchain technology to enhance data systems.
Jon Nelson explains his idea:
“ChainReactor provides node support to all major database platforms, leading blockchain technologies, a decentralized exchange of assets and supports HFT with less than a second block times. ChainReactor can perform a billion transactions per second and can scale higher.”
It will be a permissioned distributed ledger for enterprises only, with a strong digital identity, as they will pass AML/KYC. Miners and users have to comply or otherwise the system won’t let them inside.
How to avoid problems related to national laws
According to Nelson, a database shard is a horizontal partition of data in a database or search engine. Each individual partition is referred to as a shard or database shard. Each shard is held on a separate database server instance and to spread the load each of the shards becomes a mini blockchain allowing it to use the computing power more efficiently.
A transaction in the case of cryptographic assets will involve two shards or more and a series of decentralized main reactors provides the core services, as name resolution, exchange, trust and configuration management.
The ability to use the Blockchain for what it is - a log of chained transactions in blocks - gives the ability to apply the methods and not keep the data after a certain period if the application requirements are not needed.
Nelson says to Cointelegraph:
“Here is the biggest problem with Bitcoin - the transaction log never concludes the data and you have to read the whole damn thing to understand the state of the data, which is not necessary if the data has been concluded and you have a period of the log to back it up. Keep in mind you have to have block depth to know where the node has concluded to if the block is not confirmed, so the conclusion is rolled back to the previous block and the processing is mostly serial in nature.”
These procedures eliminate any obstacles regarding the existing laws in every country.
What about permissioned Blockchain and its future?
We talked to experts and asked them how they see the future of Blockchain as part of a global financial system.
Nina Kilbride, lawyer and software developer working on smart contract systems at Eris Industries, says to Cointelegraph:
“The permissioned blockchain value proposition goes beyond the act of settlement. It is the addition of data certainty. The sequelae of data certainty are far, far deeper than tech application, especially in legal contexts.”
Hans Lombardo, co-founder at Chain of things, finds ChainReactor interesting. “The problems with traditional permissioned network are there by design. For example, the comparatively lengthy settlement times are there on purpose.”
Konstantinos Karasavvas, computer scientist and expert in Systems Engineering & Architecture, Distributed Systems and SOAs, believes that, “Blockchain will find its place in the tech stack of certain companies but without major adoption of cryptos.”