“What can the blockchain do for me today?”
It’s a question that’s increasingly being asked by major financial institutions, and one that San Francisco-based Blockstack.io has been focused on finding an answer for since its launch in June.
One of a growing number of companies seeking to provide custom blockchain solutions, Blockstack.io boasts unique expertise in Standard Chartered Bank veteran Peter Shiau, who serves as the company’s CEO.
Shiau indicates that Blockstack.io is seeking to capitalize on the “thought shift” currently underway at major financial institutions, which by all accounts are becoming increasingly aware of the potential payoffs from utilizing blockchain-based systems as distributed databases.
Shiau told CoinDesk:
“This is a software stack to enable financial services to have a private isolated blockchain…that became exciting to financial institutions, because now they can start working on applications and back-office systems.”
Blockstack.io is one of a new wave of blockchain-first tech services firms seeking to partner with financial institutions on initiatives involving the technology, a group that prominently includes names such as Chain, Eris Ltd, Gem and Digital Asset Holdings, among others.
CTO and former Google engineer Miron Cuperman indicated that Blockstack.io is currently seeking to educate its potential clients so they can understand applications for the blockchain in commodities, equities, clearing and trading, emphasizing that the company is seeking to make the case the technology is actionable today.
Shiau said Blockstack.io’s goal is to replicate the success of Red Hat, the open-source software company that helped commercialize the Linux operating system in the 1990s.
“They made [software] something that could be consumed and used by all enterprises,” he said. “That’s what we aim to do – take that tech that is proven and put it together in a way that is useable for that community.”
Blockstack.io today
But, while much has been said about private blockchains, little has been perhaps made public about the exact design features that are sought after by financial institutions.
Adding to the lack of certainty is that many of the firms exploring the technology are tight-lipped about any trials being conducted. For example, while Barclays and UBS are known to be experimenting with Ethereum, neither disclosed exactly how they are seeking to use the decentralized application platform.
Blockstack.io, however, provided a deeper dive into its technology, describing its solution as a “private, isolated blockchain” with access to core “blockchain functionality” through APIs.
The platform provides four functions, according to the team: a private ledger based on Bitcoin Core and optimized for high transaction volume; asset issuance to represent real-world assets; transaction management that allows users to describe transaction flows between parties; and multi-signature wallet security.
“Using these functions, a financial institution can model existing work flows in the lifecycle of common transactions,” the company explained.
While Shiau said it would consider adding support for other blockchains to its solution, he indicated that the bitcoin blockchain remains the best option for clients today.
“Bitcoin Core is proven software and we know that it works and we want to be able to take advantage of the improvements in the bitcoin ecosystem,” he continued, calling it is the most “robust and reliable” blockchain to date.
The firm’s existing experience with bitcoin, he said, would further enable Blockstack.io to update client blockchains with the best innovations from bitcoin:
“There are other approaches are definitely interesting and there’s merit in exploring these alternatives, but if you’re a financial institution, you’re looking to enhance the architecture you have today.”
Internet of blockchains
Shiau also went on to address a lingering question in the bitcoin ecosystem, whether it’s best to consider private blockchains as intranets, or private versions of a public good like the Internet that will eventually be replaced as users become more comfortable with the technology.
For now, Shiau said he is unsure if private blockchains will want to connect with each other or with a public blockchain, like bitcoin. Ultimately, however, he suggested both “flavors” of the technology offer advantages. While bitcoin boasts security, he said private blockchains offer faster transaction times.
“The bitcoin network has its value, it allows you to exchange value in a trustless environment without counterparty risk. That was the original purpose in the paper, and to the extent that people want that, there is value in that,” he continued.
He suggested the sidechains project, currently being spearheaded by Blockstream, could increase bitcoin’s functionality, but just as easily be replicated on other distributed ledger systems.
Equally, Shiau said he sees value in permissioned distributed ledgers, cautioning that the systems are not mutually exclusive.
“You can imagine an exchange where commodities are traded, and an equity exchange, they might want to connect. You can imagine a world where these private isolated chains can talk to each other, because there have these different assets,” he said, concluding:
“I can see a future where at least the isolated blockchains will want to talk to each other.”
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