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The consultancy giant has caused upset in the fintech community by patenting an editable blockchain that allows a central administrator to edit or delete information stored in a permissioned blockchain system, the Financial Times reports. A permissioned system is governed by a central administrator using agreed upon rules. This differs from permissionless systems, like those used by blockchain pioneers such as Bitcoin, which have no central authority. A key feature of permissionless systems is that the records they contain cannot be changed. Accenture unveiled a prototype of the blockchain on Tuesday developed jointly by Accenture and Giuseppe Anteniese, a Stevens Institute of Technology professor.
The prototype aims to make blockchain more practical for use in financial services. Accenture’s head of financial services said that the prototype will make blockchain more attractive to financial services providers and regulators, and encourage their uptake of blockchain technology. This is because these parties “need a means to quickly correct errors on the blockchain,” which is not possible when using a blockchain-based system that creates immutable ledgers. It is only possible to reverse an entry on such a system, removing it completely, and that can be time-consuming. Fast corrections would be especially critical were blockchain to be used in the securities industry, where trades are conducted at high speed, but where errors, such as assigning a trade to the wrong counterparty could have serious financial consequences.
But it goes against one of blockchain technology’s key principals – immutability. The move is controversial to many because blockchain was conceived as an immutable, tamper-proof ledger, which eliminated the need for a centralized authority. However, Accenture insists that immutability is not necessary in permissioned systems because everything is overseen by a single governing authority, and argues that the need for it in a permissionless system is part of the reason banks have been slow to create viable use cases with blockchain technology. We think the success of Accenture’s system will depend on whether or not financial services firms intend to use blockchain for use cases that require flexibility. Should they decide to implement the technology in more straightforward capacities, like managing their customers’ personal details, Accenture’s functionality would not likely be especially useful.
Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.
That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that's secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology's potential to simplify record-keeping.
As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain.
Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.
Here are some key takeaways from the report:
- Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well. Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years.
In full, the report:
- Examines the funding increases that are pouring into blockchainAssesses why blockchain is becoming so popular and what factors are driving up increased research and development Explains in full how blockchain technology work and what assets make it valuable and vulnerable Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them Demonstrates the challenges to mainstream adoption and their potential solutions
To get your copy of this invaluable guide, choose one of these options:
Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIPPurchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of blockchain technology.
