Bank of England Conducts Further Blockchain Tests

The Bank of England has released the results of its latest investigation of Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term technology, conducted in partnership with a startup called Chain.

Specifically, the UK central bank has published a proof-of-concept for a digital ledger network that will handle data in a way that will allow both privacy and regulatory oversight. The paper, entitled "Fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term Proof of Concept", was published on Wednesday.

According to the paper, the aim of the exercise was to "explore some of the key questions that could arise from ensuring privacy on a distributed ledger system." It was academic rather than practical, and no testable technology was developed.

The exercise consisted of the transfer of ownership of a fictional asset between a number of participants, including a central authority and a regulator. These two nodes had additional powers. The central authority issued the assets and invited participants to the network, and the regulator could view all transactions. No other party could infer details of transactions that it was not party to.

Findings

The bank found that an attacker would need to obtain the private keys of all of the users of the system in order to decrypt all of the data. The bank considered this unlikely, but a possibility given adequate technology.

The exercise used a 'blinding' protocol developed by Chain which hid the transaction amount and the currency used. Participants in a transaction would receive an un-blinding key. The bank found that the "resilience of the system would be affected by the approach chosen by the regulatory node and whether they would be required to proactively participate in the signing of transactions as they occur or just observe and rely on actions and incentives outside of the technical solution."

The bank identified that there is a trade-off between resilience and privacy. For example, in a system in which transaction information is only shared between the parties to that transaction, privacy is optimal but the advantages of a blockchain are negated. However, it noted that there are as yet no tried and tested cryptographic privacy protocols that can cover an entire network at scale.

The study paper concluded: "Overall, it appears theoretically possible to configure a distributed ledger system in such a way that transactions remain private whilst keeping all data shared across the network, and at the same time maintaining a regulatory view of transactions."

BoE and blockchain

The Bank of England's website says that it published 65 research papers in 2017. It actually first said that it recognises the potential of blockchain technology in 2015. In July 2017 it tested Ripple successfully, although it concluded that the system is "not sufficiently mature".

Bank Governor Mark Carney recently reiterated that blockchain technology is an active area of interest for the bank, and a national cryptocurrency of its very own could possibly be in the works.