Just when a years worth of blockchain hype seems to be
subsiding, a new debate is under way about the
technologys suitability for the financial industry.
The instigator is Richard Lumb, consulting firm
Accentures group chief executive for financial services.
He contends that a key characteristic of the blockchain, which
has worked flawlessly as the distributed ledger for Bitcoin
transactions, is a hindrance to its adoption for many of the
test cases now being explored in financial markets. That
characteristic is immutability the inability to change
or correct the permanent, cryptographically protected
Arguments are par for the course in the cryptocurrency
world. The decentralized and at times anarchistic Bitcoin
community, for example, has struggled to agree on how to scale
up from the handful of transactions per second that the
standard protocol was designed to handle.
Scalability will be an issue for financial industry
blockchains, but presumably uncontroversial technological
solutions will emerge to address that need. Lumbs more
fundamental concern is that in financial transactions, errors
are inevitable and have to be resolved and reconciled, and he
is proposing a technological fix. He and his proposal to make
the blockchain editable evoked heated opposition from what he
calls a purist faction that categorically defends the
blockchain and its immutability.
Accenture Gets the Blockchain Horribly Wrong,
blared the headline of a blog post by Robin Bloor, chief
analyst of the Bloor Group. He said blockchain is as amendable
as an accounting ledger, simply by reversing an entry.
On one side of the debate are those who argue that
immutability is precisely what makes the blockchain such a
significant innovation, says an Accenture report,
Editing the Uneditable Blockchain. On the other
side are pragmatists who increasingly see where and how in
enterprise environments immutability may prohibit adoption due
to human error, mischief, and privacy laws. For
blockchain to deliver on its promise to streamline any number
of e-commerce, database, and asset-tracking applications,
the voices of pragmatism and practical ingenuity must be
heard, the report asserts.
Accenture and Giuseppe Ateniese, a computer science
professor at Stevens Institute of Technology,
co-developed and jointly filed for U.S. and European patents on
a prototype editable blockchain that was unveiled in September.
Ateniese pointed out that the solution is compatible with
current blockchain frameworks and works in a decentralized and
So why should purists be bent out of shape?
They come from the permissionless world, Lumb
tells Institutional Investor, referring to the open and
self-governing nature of Bitcoin on the blockchain. Accenture,
which is an investor in and partner of distributed ledger
company Digital Asset Holdings, is in the business of
serving corporate clients, he says. Especially in the
financial services industry, blockchain applications will be
running alongside aging legacy systems, will have to meet
extensive regulatory and compliance requirements, and will be
designed for specific purposes with permissioned access and
some degree of central administration.
Editability is a plus under those conditions, in Lumbs
view. He says client reaction has been positive, but there are
industry skeptics too. Sandeep Kumar, managing director of
consulting firm Synechron, which in September launched a
blockchain accelerator program to stimulate development and
testing in such areas as global payments, margin calls, and
trade finance, says there is no clamor for an editing
back door. He contends scalability and resilience come up
more often as real-world concerns.
Editabilitys time may come, but the increasingly
accepted enterprise-blockchain reality is that nothing happens
overnight. There is much work to be done to prove the
technology (in terms of attributes such as resilience,
scalability, security, and integration) and define standards
and protocols, says a
recent report from Ernst & Young and London fintech
organization Innovate Finance. It will probably be a
number of years before the full benefits are
It is best to have all the issues out in the open. Accenture
has raised a new one.