Richard Lumb, the Group chief executive for financial services at multi-billion dollar research institution Accenture, believes that immutability, a characteristic of Bitcoin that is directly attributed to its wild success, must be reconsidered by the world’s leading financial institutions and banks before implementing blockchain technology.
Bitcoin’s underlying technology, the blockchain or distributed ledger technology, has swept across the financial sector since early 2015 as major banks and financial institutions began to establish “blockchain labs” and “research centers” to exploit its potential in the traditional financial industry.
Hundreds of millions of dollars have been invested into the technology and startups that are utilizing the blockchain technology to improve banking services. Although the industry has not a single working demonstration to show, Accenture executive Richard Lumb believes that immutability must be eliminated in creating blockchain networks.
Technically, if immutability is taken away from a blockchain network, its features and capabilities replicate that of a traditional database. If a blockchain network is not open sourced, powered by miners globally, centralized, and not immutable, it does not serve a point in implementation since it is vulnerable to security breaches, alterable, and not resilient to external hacking attacks.
To understand the fundamental error in the development of private blockchains or “non-immutable” blockchain networks, it is important to understand the factor behind Bitcoin’s success. Bitcoin remains the world’s best performing currency due to its infrastructure that eliminates a central authority or network administrator. That means, not a single user in the Bitcoin network can control or manipulate its transactions. More importantly, its decentralized nature allows the network to become immutable to changes.
At first, banks and financial institutions aimed to implement the blockchain technology to settle transactions and assets more efficiently, in terms of costs and time. They also wanted to store their data in a more secure network, to prevent from being affected by cyber attacks and security breaches which they have failed to deal with over the past decade.
The pathway of banks and financial institutions’ development of blockchain networks has been:
- Immutable ledger
- Controllable ledger
- Non-immutable smart contract ledger
- Non-immutable smart contract private ledger that grants network administrators full control over the network.
Essentially, if anyone in the network gains control, it defeats the purpose of utilizing a blockchain network. For instance, Accenture’s new invention, called the editable blockchain, is technically identical to SQL database, in the sense that they are both:
- Private networks
- Controllable and alterable
Thus, editable blockchains serve no purpose other than storing data in centralized servers which databases can already do.
Still, Lumb argues that non-immutability is crucial for banks to remain compliant with governments. He states:
“Blockchain’s immutability could eventually run at odds with existing regulations, too. For example, the United States Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and the Securities and Exchange Commission’s Regulation S-P all require personal financial data to be easily redacted.”
If Bitcoin was non-immutable, governments and any other powerful organizations could immediately shut it down after recognizing its threat to financial sectors, the same way some regions have shut down Uber in countries like South Korea due to its threat to the taxi industry.
Even Stevens University Professor Giuseppe Ateniese is in support of Accenture’s take on editable blockchains, stating legal issues which banks may struggle to deal with.
“But to succeed, we must resolve human errors, accommodate legal and regulatory requirements, and address bugs, mischief, and other issues,” said Ateniese.
Bitcoin experts and developers seem to strongly disagree with the idea of a non-immutable blockchain, as it operates the same way traditional blockchains do.
A #blockchain you can simply edit unilaterally (rather than fork w/ consensus of the network) is just a database. #BlockchainRevolution https://t.co/RwABelRK8K
— Alexander Tapscott (@alextapscott) September 26, 2016
“Banks like the edit button. That’s why nothing interesting is going to happen with them and #Blockchain tech for ten years.” @twobitidiot https://t.co/1H5Di8iFKC
— Akin Sawyerr (@AkinSawyerr) September 21, 2016
An editable #blockchain patent is capitalizing on hype for marketshare
If you want something you can edit use a SQL database. @Accenture
— Bryce Weiner (@BryceWeiner) September 22, 2016