In the late 20th century, the internet changed the speed at which business was conducted. The financial sector was the most profound recipient of this change, where third-parties typically facilitate transaction requests (such as trading, investment banking, etc.).
Unfortunately, the internet has failed to fully circumvent the logistical issues involved in conducting such transactions. With the advent of blockchain technology, those obstacles may soon be overcome.
Blockchain In Banking
In a report entitled: “Blockchain Technology: Preparing for Change”, Fortune Global 500 firm Accenture recently stated that:
…blockchain technology has rapidly gained traction in the capital markets industry as one of the most exciting technological developments in recent history. In surveying the global financial technology sector, Accenture has identified blockchains as “possibly the biggest opportunity from taking an open approach to innovation”. This technology has the potential to help minimize counterparty risk, reduce settlement times, improve contractual term performance and increase transparency for regulatory reporting.
The Accenture report notes that early adoption and growth of blockchain technology will primarily occur between 2016-2024. And this growth is to be accompanied by a multitude of new business models as well.
As a result, banks are forming partnerships with blockchain-based companies (if not starting their own blockchain). The banking industry now relies on blockchain technology to conduct faster and more efficient global transactions.
So where is the fly-in-the-ointment here? Very simply, it’s the future ability for cryptocurrencies to scale.
Their potential to quickly go mainstream is severely limited by current transaction speeds. If the dollar suddenly crashes, any mass movement towards Bitcoin (or Ethereum) will grind all transactions to a halt.
In 2017, bitcoin’s growing popularity lead to lengthy transaction wait times. Traders quickly grew frustrated and angry.
So bitcoin developers produced what they called Segregated Witness (SegWit for short). By freeing up block space, SegWit enables more transactions to be added to the blockchain. As a result, traders witness greater transaction speeds.
An elegant solution at the time, it remains an open question as to whether SegWit can handle a fiat currency crash.
In such a scenario, bitcoin’s ability to remain decentralized would suddenly be at risk.
To begin with, larger blocks sizes would need to be created to cope with popular demand. As a consequence, transaction fees would be far more expensive.
In addition, fewer miners would be willing to operate full nodes (and thus control their own hash power). Absent full-node ownership, the hash rate of large miners would increase. Hence, the move towards greater centralization.
Worse yet, such cryptocurrencies become more vulnerable to 51% attacks (thus allowing the hacker to control a coin and incur double-spending).
While seemingly esoteric, mining dynamics play a very understated role in ensuring bitcoin’s decentralization.
The Ethereum platform continues to have scaling issues as well.
The Cryptokitties app was famously forced to halt trading because of network congestion in late 2017. The immediate solution to that crisis was simply to raise transaction prices.
Perhaps not surprising, given that Ethereum blocks are limited to 15 transactions-per-second (TPS).
And while co-founder Vitalik Buterin has suggested that new scaling solutions are being devised (for up to a million TPS), that has yet to occur. For reference, Visa currently handles about 2000 transactions per second.
A New Solution
When released, the XTRABYTES’ platform is expected to scale far better than either Bitcoin or Ethereum.
The development team is excited to showcase XTRABYTES’ Proof-of-Signature consensus algorithm, as they believe it offers superior transaction speed and security. Details coming soon.