Former Bitcoin lead developer and Blockchain technology company R3CEV LCC’s R3 Blockchain consortium of multi-billion dollar banks and financial institutions are defying the promise of the creator of Bitcoin, Satoshi Nakamoto.
Over the past few months, global banks including Banco Santander, Westpac Banking Corporation, Deutsche Bank, HSBC, and Citibank have joined the R3 initiative to develop blockchain-based financial systems and protocols that are applicable to the existing technologies of banks and financial establishments.
In essence, these bank are trying to create a global blockchain-based banking system, which enables other institutions and financial organizations to utilize the technology in processing the settlement and transfer of transactions and assets.
“Our clients deserve a banking experience that comes with enhanced security, low costs and minimal errors,” said Satoshi Murabayashi, CIO, in charge of digital innovation, at Mitsubishi UFJ Financial Group (MUFG) in September, 2015. “In putting together this partnership, R3 is committing its own expertise and leveraging the combined resources of all of our partners to deliver a distributed ledger solution that could help our clients realize that experience. We’re excited to be a part of the team.”
The main difference between a decentralized payment network like Bitcoin and a conventional banking platform the participants of R3 are trying to develop is, that the Bitcoin blockchain does not involve an intermediary or a third party application to revoke, change, or alter transactions. The Bitcoin network is truly decentralized, in the sense that the foundation of the Bitcoin technology is based on the concept of peer to peer payments and settlements.
This concept of decentralization is emphasized by Satoshi Nakamoto in Bitcoin’s white paper, where Nakamoto states, “While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes.”
Because financial institutions are required by law to have control over their transactions and inevitable disputes, the R3 consortium will grant a certain level of authority to the administrators of the banks to revert and regulate the transfer of assets and payments. Thus, the development of an enterprise-grade bank-focused blockchain network currently being designed by the R3 consortium and Mike Hearn defies the promise made by Satoshi Nakamoto, and the concept he introduced in 2008.
Yet, the banks and financial establishments participating in the R3 initiative believes their technology could be at the forefront of this generation’s financial evolution, and transform the conventional methods of settling transactions and clearing assets in the finance sector.
“Ultimately, these technologies will benefit not just financial services firms, but their clients and end-users as well. We’re very excited to be at the forefront of this global evolution,” says R3 CEO David Rutter.
It is difficult to analyze the progress and development of R3’s blockchain-based technology, as the consortium strongly denies the engagement of independent members and companies apart from financial institutions. However, the centralized application being developed by R3 will not be significant in transforming the finance sector.