SWIFT Digs Deeper into Bitcoin with Research Grants, Mining Paper

SWIFT continues to develop its interest in digital currency, announcing a couple of notable initiatives.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) continues to develop its interest in digital currency, announcing a couple of notable initiatives.

SWIFT is a global network facilitating the transmission of transactional information between financial institutions. The company has developed a strong interest in payments technologies, such as those aiming to streamline cross-border payments. Recently, bitcoin-powered remittance startup Bitspark and UK-based vault service Elliptic were selected among 20 finalists for SWIFT’s Innotribe Challenge finale, to be held at Sibos in Singapore.

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SWIFT Institute, the company’s research group, has published a paper titled, “Bitcoin – the Miner’s Dilemma.” In it, the risks of bitcoin mining pools are examined. Its authors conclude that Bitcoin will become more stable if large mining pools break off into smaller ones. They see large pools posing a risky landscape, as they can be fraught with internal fraud or can attack peers. “Closed pools”, where participants trust each other and are therefore naturally smaller, are inherently safer.

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Peter Ware, Director of the SWIFT Institute, commented: “Bitcoin is a hot topic in the industry at the moment and our latest research gives interesting insight into the Bitcoin system using game theory to highlight potential pitfalls and suggest ways in which to improve overall stability of the currency.”

The Institute is also awarding grants totaling up to €15,000 to research teams investigating how Bitcoin’s blockchain technology can impact securities trading. It notes how transactions can be settled within a matter of minutes, as opposed to the traditional 2-3 days, and how Nasdaq and UBS have already undertaken exploration into this area.

The Call for Proposals also expresses some healthy skepticism, posing the question if blockchain technology is truly practical for such applications. It notes how the Bitcoin network, due to its limitations, cannot process more than roughly 7 transactions per second, or 600,000 per day- roughly the number processed on the London Stock Exchange.

As Bitcoin software typically runs on desktop computers, it would have to move to supercomputing infrastructure in order to cater to global demand in securities trading. This, the authors argue, may undermine the distributed ledger’s decentralization.

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