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Ex-Google Engineer Launches Blockchain-Based System For Banks (reuters.com)

Posted by BeauHD on from the solution-is-in-the-cloud dept.

An anonymous reader quotes a report from Reuters: A former Google engineer, whose speech recognition software is used in more than a billion Android smartphones, has launched a company that uses blockchain technology to build a new operating system for banks. Paul Taylor, a Cambridge University academic with an expertise in artificial intelligence, speech synthesis and machine learning, started working on the system, called Vault OS, two years ago in a basement in London's Shoreditch district, known for being a tech start-up hub. The technology, which underpins the digital currency bitcoin, creates a shared database in which participants can trace every transaction ever made. The ledger is tamper-proof and transparent, meaning that transactions can be processed without the need for third-party verification. The system also negates the need for costly in-house data centers, as it uses cloud-based systems, which banks can use on a "pay-as-you-go" basis, which means that there is no single point of failure. Taylor said major high-street banks were spending around a billion pounds ($1.3 billion) a year on computer technology, much of which he said was being used for propping up the current "legacy" systems rather than on any innovative technology. The start-up has been working with about ten banks, Taylor said, at least one of which would be starting a trial using the new system in August. He expects the system to be up-and-running within about a year. In banking-related news, a Congressional report shows that China's spies hacked into computers at the Federal Deposit Insurance Corporation (FDIC) from 2010 until 2013 and American government officials tried to cover it up.

1 of 62 comments (clear)

  1. Article is content-free by Areyoukiddingme · · Score: 5, Interesting

    The article is content-free and makes no sense, as so many of these articles do. It's also barely longer than the "summary". At least this one didn't fall victim to the usual tech reporting failure of saying the blockchain is public. Still, the magical blockchain does not eliminate $1.2 billion in expenses. Far from it. If anything, their hardware expenses will go up, because they have to devote hardware to hashing, where before, a financial transaction was a straight-forward database transaction. They still have to keep track of everything they keep track of now, plus hash. Now, they can control and explicitly cap the amount of hashing required to drive the system, since they're not limited to the Bitcoin implementation, but there still has to be work done, i.e. processing.

    Here's the nonsensical part though:

    The start-up has been working with about ten banks, Taylor said, at least one of which would be starting a trial using the new system in August.

    At least one? You mean at least two. One bank doesn't need a blockchain at all. The controls required to prevent internal fraud are quite simple when you know everything there is to know about both sides of the transaction. It's when one party of the transaction has an account at a different bank that a blockchain comes in. The banks are hoping to disintermediate the Automated Clearing House (in the US) and the Pan-European Automated Clearing House (with the cutesy PE-ACH acronym). In practice, they're going to discover that sufficient hashing to secure 100 billion transactions per year (ACH+EPN+PE-ACH) is neither free nor even cheap. It remains to be seen if hashing expenses can be kept below ACH fees.