One of the core principles of Blockchain technology has potentially been undermined by the creation of an editing tool.
The company responsible however, Accenture, says edits would only be carried out “under extraordinary circumstances to resolve human errors, accommodate legal and regulatory requirements, and address mischief and other issues, while preserving key cryptographic features.”
But the fact that it utilises permanent distributed ledgers, means that virtually anything of value can be tracked and traded. This has an obvious enterprise application here, as securities can be settled in minutes instead of days. It can also be used to help companies manage the flow of goods and related payments around the world, or simply enable manufacturers to share production logs with OEMs and regulators to reduce product recalls.
And because Blockchain is effectively run by a network of unrelated computers, it produces a permanent ledger of transactions with which no one can tamper. Until now.
Accenture’s move to create an editing system will no doubt be viewed by some technology observers as a betrayal of what blockchain technology is all about. But the company insisted it is needed, especially in the financial services industry.
“The prototype represents a significant breakthrough for enterprise uses of blockchain technology particularly in banking, insurance and capital markets,” said Accenture.
“The invention is designed for ‘permissioned’ blockchain systems, which are managed by designated administrators under agreed governance rules,” said the firm. “The invention is not designed for ‘permissionless’ systems, like the cryptocurrency system supporting Bitcoin, which is open and decentralised and where the absence of a single governing authority makes absolutely permanent, or ‘immutable,’ recordkeeping vital.
“As we focus on new uses for blockchain technology beyond the realm of cryptocurrency, absolute immutability will become both a virtue and a vice,” said Richard Lumb, group chief executive of Financial Services at Accenture.
“For decentralized cryptocurrency systems, such permanent accounting has been crucial in building trust and faith among participants,” said Lumb. “But for financial services institutions faced with a myriad of risk and regulatory requirements, absolute immutability is a potential roadblock. Our invention strikes a balance for enterprise use that preserves the fundamental value of the technology while enabling enterprise adoption.”
The way this editing tool will work is that designated administrators (acting on agreed rules of governance) could edit, rewrite or remove blocks of information without breaking the chain. Accenture said it does this by using a new variation of what is known as the ‘chameleon’ hash function, which can recreate algorithms that link two separate blocks through the use of secure private keys.
Accenture and co-developer Dr. Giuseppe Ateniese (of the Stevens Institute of Technology) have apparently filed patent applications for the invention in the United States and the European Union.
“As blockchain solutions gain momentum in financial services and other industries, more and more real-world situations will emerge where information on blockchains simply needs to be modified or removed,” said David Treat, MD of Accenture’s capital markets blockchain practice.
“Our solution makes it possible to deal with situations in a predictable fashion when things go wrong and to meet new and changing regulatory and legal requirements, like the ‘right to be forgotten’ and other data-privacy and retention rules,” said Treat. “An editable form of blockchain will make the technology more practical and useful for enterprise systems and accelerate its adoption. It combines the confidence that comes from immutability with the pragmatism required in an imperfect world.”
The development of the editing tool will not doubt be closely watched, amid growing adoption of the technology.
Indeed, Blockchain received a major show of support from the UK Government earlier this year after Cabinet Office Minister Matthew Hancock confirmed it was looking at how the technology could be used to manage and keep track of the distribution of public money, such as grants and student loans.
Last year, it was also reported that the NASDAQ stock exchange was evaluating blockchain in order to see if it could be used in trading of shares in private companies.
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