Fintech startup Ripple has opted for using only parts of the technology because 'there are a few things wrong' with the classic version
The fintech startup helping the Bank of England to research blockchains has warned the technology may not, in fact, work for banks wanting faster and cheaper ways of moving money.
Ripple, which has developed an internet-based bookkeeping system for cross-border payments, has said there are a "few things wrong" with blockchain in its purest form that make it unsuitable for banks requiring privacy and speed.
The warning will cut through some of the hype around distributed ledger technologies, which the world's largest financial institutions hope can help them modernise post-trade systems and save billions in the process.
The technology was originally created to underpin trading in cryptocurrencies such as Bitcoin and works as a record-keeping system that gives multiple parties access to the same transaction records.
But Marcus Treacher, the global head of strategic accounts at Ripple, said the fact that each user of a blockchain has a record of every transaction conducted would not work for banks competing with one another. He said: "Every single bank gets a copy of everything, even when it’s encrypted. That is not going to work."HT: thanks to a reader.
Another crucial issue is one of speed. The more banks that trade on a single blockchain, the more updates to, and copies of, a ledger will be necessary. This, according to Treacher, will slow the whole system down.
He said: "If you have every bank on the platform and all the payments need to be updated, the system will slow down. The speed of Bitcoin is quite slow now because of the way it’s updated. The infrastructure you are using has to be able to deal with high volumes. That’s why you need to break free of this single idea of blockchain and just use the part that you need to use."...MORE
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