Building On Blockchain, For Banks

Blockchain may get the lion’s share of its attention in reference to bitcoin. And, indeed, the prospect of a new digital currency that has no central authority may engender heated debate.

But blockchain, the recordkeeping technology that helps track the currency itself, has the added advantage of being flexible enough to be adapted across a variety of uses. One company, AlphaPoint, recently announced the availability of StreamCore, a blockchain-powered database that can be built, according to Joe Ventura, AlphaPoint’s chief executive officer, “from the ground up.”

StreamCore is geared specifically for financial institutions and can be configured to serve a number of applications, ranging from accounting to risk management.

Applications built on top of and based on blockchain have significant benefits for FIs, said Ventura, who pointed to a recent study by Santander InnoVentures, which estimated that blockchain technologies will help FIs cut infrastructure costs by between $15 billion and $20 billion annually by 2022, as the distributed ledger system can help speed payments but also eliminate the need for oversight via central authorities. Perhaps it should be no surprise that an increasing number of banks have been joining initiatives bent on mapping frameworks for the blockchain use.

For cross-border transactions, and for B2B, said Ventura, current transaction flows need infrastructure, especially as interaction occurs across several companies. But with StreamCore, across so many points of contact, noted the executive, it is not possible to change the message, and each message has a record of each previous message in the chain.

B2B carries particular challenges in interaction between intermediaries and several steps in each transaction. Through blockchain and digital currencies such as bitcoin, one step, the FX part of the equation, can be effectively eliminated, along with fees and delays. As Ventura said, companies operating across bitcoin exchanges can bypass, say, transferring U.S. dollars into other currencies, thereby saving hundreds of dollars in associated costs.

For payments, the advantages lie in the fact that there are a number of layers of security even as FIs interact with peers. The messages that make their way across StreamCore, as well as transaction data, are relevant only to those specific events and are also encrypted. With encryption, the only institution that can decipher a given communication is the one for which it is intended, and AlphaPoint has pointed out that each message is essentially its own encrypted block across the chain. Each blockchain, as it moves forward from FI to FI, has its own virtual folder and secure key. “No institution or individual can forge an account or an action” using StreamCore, said Ventura.

Of particular usefulness for FIs is the fact that data can be accessed as if it were contained in a “traditional” database and indexed. That is a boon for compliance and auditing, as FIs can readily present information and all parties can rest assured with the irreversibility of transactions and the aforementioned security measures. All data through StreamCore, said Ventura, can be published to a clearing house, a broker or a regulator.

Blockchain, used in this manner by FIs, represents what Ventura called “a natural evolution of Big Data.” He traced the movement from internal files kept at an enterprise to SQL and through further innovation. Now, there is blockchain, which means that “banks can trust each other and participate in the network in real time, with uniform and verifiable data between institutions.”