21 Inc. has come up with something more than ASICs. 21 Bitcoin computer is claimed to be the first computer with native hardware and software support for Bitcoin protocol. According to the company, it has the hardware to mine a stream of small amounts of Bitcoins for development purposes, and the software to make that Bitcoin useful for buying and selling digital goods. It can be used by developers and individual miners to create Bitcoin based apps, services and devices.
Embedded blockchain mining is a very nascent idea, which involves embedding mining chips into different kinds of Internet-connected devices. Last year, 21 Inc. revealed its plans to develop a chip (called 21 BitShare) that can be embedded into mobile phones, enabling them to silently mine in the background.
Another innovation from 2015, by Patric Lanhed and Juanjo Tara, is a chip that can be implanted in your hands for Bitcoin bio-payment. They have gone a bit overboard, but it might be a glimpse of what the future holds. You never have to worry about forgetting your purse or phone at home, when tapping your hand can complete a payment.
Bit more than Bitcoin
Undoubtedly, Bitcoin, allegedly invented by Satoshi Nakamoto in 2008, is one of the best-known names in distributed ledger and blockchain technologies, but it is not the only one. Of late, there has been a lot of interest in this space, and many alternatives have come up. Here is a quick look at some of the contenders:
Ethereum is a decentralised platform that runs smart contracts. These are apps that run on a custom-built blockchain, with a platform-specific cryptographic token called Ether. The blockchain can move value as well as represent ownership of property. According to the company, “This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counter-party risk.”
Online reviews show that Ethereum transactions are confirmed in seconds compared to minutes for Bitcoin.
Another key difference is that Ethereum uses ethash, while Bitcoin uses secure hash algorithm SHA-256.
The two platforms also differ in purpose. While Bitcoin was intended to be an alternative to regular money, Ethereum is meant as a platform that facilitates peer-to-peer contracts and applications via its own currency vehicle. The focus of Ethereum is not to replace regular money but to facilitate and monetise the working of Ethereum to enable developers to build and run distributed applications.
Ripple aims to be a global settlement network to facilitate instant, certain, low-cost international payments. According to the company, Ripple’s distributed network allows foreign exchange to be externally sourced from a competitive foreign exchange marketplace or an internal foreign exchange trading desk via Ripple’s FX Market Making Solution.
The backbone of Ripple’s network is Ripple Consensus Ledger (RCL), a secure distributed ledger that uses the consensus process to settle transactions. Like other blockchain technologies, it does not require a middleman, and is very secure. The RCL holds the order book with bid/ask offers from payment initiators and market makers. Its path-finding algorithm enables it to find the lowest foreign exchange rate across all order books and currency pairs. It is basically a DLT, but with a specific purpose, which makes it more enterprise-ready.
Ripple aims to solve specific problems, which banks are likely to have with other public ledger based systems, such as delay in confirming transactions and lack of privacy. Ripple takes just three to five seconds to confirm a transaction through consensus among validators, as it does not use a proof-of-work method.
To solve the privacy problem, it advocates the use of Interledger Protocol (ILP), which can work with any bank or non-traditional payment network, regardless of its underlying technology.
ILP is an emerging standard that provides all benefits of public and private blockchains, while also ensuring that transaction data remains private to only the transacting parties. Ripple feels that ILP is a much better approach than private, bank-sponsored blockchains, as the latter approach can lead to a further fragmentation of payment networks.
Hyperledger is a collaborative effort to develop a cross-industry open standard for distributed ledgers. The current implementation employs Bitcoin UTXO transaction model, which uses a system of public and private keys to ensure that transactions remain uncompromised while travelling to their destination. As of now, Hyperledger does not have any native currency. They believe that the technology will be useful for syndicated loans and capital markets infrastructure.
An interesting innovation, MultiChain is a platform that lets banks and other organisations develop their own blockchain. Customers can customise various aspects of the blockchain such as whether it is private or public, target time for blocks, who can connect to the network, how they interact, maximum block size, metadata that can be included in transactions and so on.
They also have their own improvised mining technique called mining diversity. The process enables miners to approve transactions in a random rotation. The company claims that this structure allows more miners to participate in the approval of transactions, while ensuring there is no fixed order of verification that could be corrupted.
India can benefit from blockchain technology
Every other day, there is a press release about a new DLT or platform. It is clear that it will play a key role in the future of the finance industry.
“For the financial services sector in India or abroad, blockchain offers the opportunity to overhaul existing banking infrastructure, speed up settlements, organise assets and streamline stock exchanges, although regulators want to be assured that it can be done securely. According to Santander, the banking industry could save about US$ 20 billion every year with the implementation of blockchain processes,” explains Abhishek.
“According to many evangelists, the possibilities are limitless. Applications range from storing client identities to handling cross-border payments, clearing and settling bond or equity trades to smart contracts that are self-executing, such as a credit derivative that pays out automatically if a company goes bust, or a bond that regularly pays interest to the holder,” he adds.
The emergence of enterprise-grade DLTs including highly customisable blockchains and enthusiastic support that banks and tech majors are extending to such companies make it clear that DLT is the way ahead for the financial services sector.