The Mitsubishi UFJ Financial Group (MUFG) has announced the design and deployment of a payment platform based on blockchain technology, in partnership with US cloud provider Akamai.
Once developed, the bank claims the platform will be both the fastest and most scalable of its kind, with the capacity to process one million transactions per second and offer near real-time confirmations.
The transaction speed and confirmation time on a blockchain depend on the speed of the network between individual nodes and the time required for new blocks – elements that store transaction details – within a node to be created and validated.
Speed vs security
The slower speeds and greater complexity of most blockchain systems have been among the reasons for criticism of the technology within the banking sector, most notably by Bank of England governor Mark Carney in a speech earlier this year. They have also been the spur for developing faster, leaner alternatives, such as Tangle / Directed Acyclic Graph (DAG) data models, which lose the ‘block’ and ‘chain’ aspects of distributed ledger systems.
MUFG and Akamai have adapted the traditional blockchain architecture by positioning all nodes responsible for consensus decision-making on the Akamai Intelligent Platform, which should reduce the time it takes for nodes to communicate transactions.
However, little detail has been provided on how MUFG will retain the levels of security associated with traditional blockchains, aside from a vague statement outlining “a unique design permitting high-speed and high-capacity creation and verification of new blocks within nodes.”
The reliance on mining – an energy-intensive cryptographic process that validates transactions by solving complex puzzles – is viewed as fundamental to the immutability of several cryptocurrency blockchains. However, next-generation blockchains set up to support existing financial institutions and cross-border payments – including Ripple and Stellar – use consensus-based algorithms instead.
It’s likely that this will the chosen method of confirming transactions for MUFG and Akamai, as the two seek to prove that a trade-off between network security and transaction speed isn’t necessary.
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“This new blockchain-based online payment system, built upon our cloud platform, will be designed to address the concerns related to scalability, latency, and security that have to date hindered broader use of blockchain,” said Dr. Tom Leighton, CEO and co-founder of Akamai.
MUFG and Akamai expect the network to be up and running in Japan during the first half of 2020. It could be used for cross-border payments and micro-transactions.
“For years, the financial industry has sought to utilise blockchain to secure and hasten transaction processing and lower associated costs.” said Nobuyuki Hirano, president and group CEO of MUFG.
“We have high expectations for our partnership with Akamai to provide customers with the ability to support significantly greater volumes of high-speed payment transactions without compromising the level of security required for payment networks.”
Earlier this month, MUFG announced a pilot with its Thai and Singapore-based subsidiaries and Standard Chartered to move real funds across borders using the Ripple blockchain, RippleNet.
The bank also has plans to launch its own cryptocurrency later this year and has money tied up in Coinbase, one of the world’s largest cryptocurrency exchanges.
Internet of Business says
Internet of Business reported yesterday that industry lobby group UK Finance and financial services strategy company Parker Fitzgerald have released a research paper outlining the risk posed by banks’ use of cloud-based data storage and experimental blockchain applications.
“The future relationship between ‘fin’ and ‘tech’ will be one of symbiosis,” suggested Parker Fitzgerald. “But this symbiotic relationship between financial and technology sectors will bring to the fore non-financial risks, such as technology risk, cybersecurity, data privacy, and digital conduct.
“Opportunities and risks brought about by fintech also call for a rethink of financial regulations,” the company added.
Nevertheless, banks all over the world are pushing forward with blockchain pilot programmes and exploring the technology’s potential. For example, earlier this month Poland became the first nation to shift banking records en masse onto blockchain.
Credit bureau Biuro Informacji Kredytowej (BIK) partnered with distributed ledger specialist Billon to deploy a blockchain system capable of securely storing the credit records of 1.2 million Polish businesses and 24 million citizens. The programme is supported by the largest banks in the country.
Meanwhile, new crypto investment bank CCC opened in Hong Kong last week.
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