Is Blockchain Ready for Banking Prime-time?

October 13, 2017 – Blockchain, the cloud-based open ledger associated with cryptocurrencies such as Bitcoin is increasingly being tested to see if it can handle the business volumes associated with financial markets. The reality so far is this: blockchain could replace the underlying accounting systems for every transaction on this planet if it can get up to speed. But so far it hasn’t.

Blockchain is a digital ledger capable of tracking any type of transaction from bank accounts to health records. It can be used for currency exchanges making trade transactions simpler to manage and audit. Almost every marketplace on the planet can have blockchain behind it.

That’s where a new blockchain platform developed at the National University of Singapore is proving to be an interesting advancement for the technology. Called Zilliqa, this blockchain ledger is capable of doing business at a rate of 2,488 transactions per second. Compare that to blockchain standard-bearers, Ethereum and Bitcoin which can handle 7 to 10 transactions per second and you can begin to see the significance of what Zilliqa can do.

How does Zilliqa manage such high volumes?

The National University of Singapore created a large network of computer systems running in parallel with machines processing transactions in what they call “shards.” By splitting up the transaction volume this way and then assembling the end result the sharding protocol allows blockchain to scale and handle significantly larger volumes of transactions.

Currently, the University is running Zilliqa in a test network. But if it were to scale to the size of Ehtereum’s current computing infrastructure, it could handle 15,000 transactions per second which is almost double the average volume of VISA, currently the biggest network for handling electronic payments.

The University intends to release Zilliqa’s source code in December in keeping with the open system, public nature of blockchain. That should allow banks, energy utilities, manufacturers, warehousing operators, insurers, hospitals and other businesses to further test the ability of the technology to scale to meet their unique requirements.

For those who have been skeptical about blockchain as being incomprehensible and therefore unlikely to supplant existing transactional ledger management systems, the promise of Zilliqa represents a disruptive leap forward. The lack of speed has been holding the technology back.

The final disinhibitor has been the terminology of blockchain. Public education so that even laymen like me can understand how blockchain works and how we can use it remains a challenge. So maybe my small attempt here to decode blockchain terminology will help. If you break down the term blockchain into “block” and “chain” it becomes less mystifying.

A block is another name for a data file. Each block contains a complete record of a transaction between“seller” and “buyer.” The blockchain receives and assembles blocks linearly. Hence the reference to a “chain” with each block secure and accessible only to those who created it or have been given permission to access it.

As more application tools get developed for blockchain it is expected that industry, and governments will find the technology more appealing, enabling them to abandon existing transactional record keeping. With every paper and study that comes out pointing to the technology’s ability to improve data security, streamline operations, and slash costs, it would seem that Zilliqa’s demonstration of scalability may prove to be the tipping point that leads to widespread adoption.