Some of Ireland’s biggest banks have begun testing blockchain technology for domestic and international use in payments, including Ulster Bank, AIB and Permanent TSB, in collaboration with Deloitte.
They are using a fork of Ethereum called Emerald, developed by the Royal Bank of Scotland, the parent corp of Ulster Bank, which may be open sourced according to a technical paper.
The developers say the modified version of ethereum can handle hundreds of transactions per second with settlement times in just seconds, marketing the system as an alternative to SWIFT.
The testing of the platform was “encouraging,” they say, with further discussions regarding state channels which could “speed things up,” but at a cost of complexity regarding how state channels are set-up.
Overall, the developers seem to be very familiar with ethereum and appear to be keeping up with updates, citing Vitalik Buterin and further stating:
“Ethereum is very much aimed at being a public system. Many of Emerald’s requirements are at odds with the broad direction Ethereum is taking. That said, it would be immensely powerful to extend Ethereum to support both use cases. Some conversations with the core Ethereum team would resolve whether contributing or forking would make the most sense.”
It’s an interesting suggestion if it can be achieved and it’s not clear whether those conversations took part, but it appears obvious RBS thinks this is showing much potential as the technology is now being piloted by the Irish banks.
Ciarán Coyle, chief administrative officer at Ulster Bank, told the Irish Times that the “blockchain has the potential to disrupt multiple industries for the benefit of customers, and we’re determined to investigate how we can harness this for the financial sector.”
While a representative from Deloitte warned that “blockchain adoption will happen more quickly than anticipated and without a proactive and well-adopted strategy, banks and insurers risk being locked out of potential innovations enabled by this technology.”
The RBS developers say that while within domestic payments there is a trusted authority like the Bank of England which can permit for Faster Payments of as good as instant, international payments have no central authority, therefore take days for value to move:
“Cross currency international payments have no central authority. Distributed ledgers, which allow consensus without a central authority, could be a good fit for international payments. However, a first achievable step might be to put a domestic system live, using a distributed ledger, to prove out the technology.”
Blockchain technology could reduce those days to seconds, freeing up all that value stuck in limbo and thus increasing efficiency in commerce. Towards that end, they, and the Irish Banks, seem to have chosen ethereum, concluding:
“Ethereum can scale to payment volumes consistent with a domestic payment system. There are some more avenues to investigate that would lead to it supporting much higher volumes.”