As Accenture files a patent prototype that would allow changes to be made to the blockchain in ‘exceptional circumstances’ the consultancy firm has come under criticism.
Earlier this month, Richard Lumb, global head of financial services at consultancy firm Accenture, wrote a column in the New York Times discussing the immutable ledger of transactions through the blockchain. According to Lumb, while the permanence of the blockchain has been vital in building trust among the people who use it, its usefulness can be limited in financial services.
Lumb adds that the blockchain technology could also run into difficulties with other regulations such as the United States Fair Credit Reporting Act or the Securities and Exchange Commission’s Regulation S-P, which require personal financial data to be easily redacted.
However, after Lumb said in the New York Times that Accenture was working with leading academics to create an editable blockchain prototype, and shortly thereafter reported that the company had taken steps to patent a system, he has come under criticism.
Speaking to CCN, Dave Birch, director of innovation at Consult Hyperion, and considered one of the top ten most influential voices in banking, said the patent by Accenture was a clever mathematical trick to avoid having to recompute an entire blockchain.
Even if banks wanted an editable record of transactions, I’m sure that regulators would prevent them from using it.
When asked what he thought of Richard Lumb’s statement that the permanence of the blockchain records has been vital in building trust, but can limit its usefulness in financial services, Birch said that Lumb was wrong.
Banks don’t correct mistakes by rubbing them out — they are regulated institutions vital to our economy, not the mafia.
However, David Farmer, Head of Europe at Coinbase, who spoke to CCN, said that Richard Lumb’s statement depends on your perspective.
He said that:
If you are building something entirely new from the ground up, then you take the immutability of blockchains into account, whereas if you are extending existing services with new technologies, you need to take into account legacy requirements.
Farmer pens Encyclopedia Britannica offering a costly digital version versus Wikipedia building something entirely new as an example.
In a recent blog post, though, Birch discusses mutable and immutable blockchains. He highlights the fact that because the blocks in a blockchain are chained together a person can’t just go back and change the contents of one block without having to subsequently change the contents of every other block, and getting permission from everyone beforehand.
In the blog post, Birch states:
If a bank makes a mistake — let’s say it accidentally opens a couple of million bogus accounts — then it can’t just go back and scrub the backup tapes and pretend it never happened.
According to Farmer, it’s important to make the distinction between private and public blockchains.
The ability to edit blockchains may be useful for financial services using blockchain technology, but it is unlikely to impact public blockchains as their consensus mechanism are decentralized.
Over time, though, Coinbase believe that open protocols and public blockchains will lead to more innovation than closed ones due to the power of network effects and open, global participation.
Although there may be use cases for private blockchains within financial services, public blockchains — like Bitcoin and Ethereum — will resemble the Internet.
Public blockchains will be the driver of the next big wave of technology because of the global community of developers and entrepreneurs, Farmer added.
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Last modified: May 21, 2020 10:16 AM UTC