Global banking blockchain to be open source
(11 December 2015 – Australia) R3, the blockchain project backed by 30 of the world's largest banks is creating an open-sourced, generic "shared ledger", which banks want to use to reduce reconciliation costs.
While at a blockchain workshop supported by the Commonwealth Bank of Australia (CBA), Tim Swanson, Head of Research at the technology firm, told Fairfax: "Many banks feel they can reduce, or eliminate altogether, various costs, by adopting some sort of common shared ledger and let that proliferate through the industry.”
Although the coding being open source is a firm decision, the way in which the new blockchain will operate is unclear according to Swanson.
The firm’s blockchain coding can be open (similar to the Bitcoin blockchain) or a “permissioned” blockchain where verification will need to be authorised by member banks.
The latter option, which is supported by industry heavyweights, offer the advantages of public blockchains without the troublesome openness of the Bitcoin network where anyone can be a node on the network anonymously. Permissioned blockchains for banks and financial operators, are being developed by giant Swiss bank UBS , Bitcoin exchange itBit and more.
Swanson said “it’s a big umbrella”, when referencing the range of applications the R3 blockchain is being tested for, which includes trade financing, processing syndicated loans, the settlement and clearing of OTC derivatives, and marketplace lending.
He added that the technology would also need to pass regulatory barriers, saying "Just because you build some tech, it does not mean it will be used by financial institutions or will pass the smell test of regulators.
"If neither of those bodies are OK with it, it won't be used. The best way is to start from scratch, and build in [regulators'] specific needs.
"The regulators I have interacted with in multiple countries have been very open-minded in thinking about how some of this tech might be used," he said.
"Most regulators I have spoken to are 'cautiously optimistic'; they want to take a rightfully conservative approach to make sure things are delivered. If we do our job right, what this tech can do is allow regulators to have a window into real-time data, which they can read and react to and create policy towards. If regulators have a window into what is going on, they can get a better idea of preventing systemic risks."
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