æternally efficient

“Distributed Ledger Technology” has been present in finance-themed conversations all over the globe for a while now. Juggernauts of banking and finance have not only played with the term verbally, but have engaged in various collaborations. They are quite clearly trying to tame the technological beast called “blockchain” and try integrate its capabilities to serve their centuries-long quest for influence and profits.

Mitigating and adapting

The finance sector wants to create a middle ground between the perceived anarchy of decentralized blockchain systems and their centralized, but at the same time fragmented, infrastructures that serve less than half of the world’s population. As evident from the recent report by the US Fed on Payments, Clearing and Settlement (PCS), the current state of the global finance network is such that significant changes to it are all but impossible. The system is composed by such an array of various, interlinked actors with a myriad of different functions, that interaction with it can sound more technically complex than replacing it.

Although it is still way too early to tell, decentralized PCS systems could threaten a wide range of revenue streams for big finance and expose their profitable inefficiency. The raison d’être of the current global financial framework is far from endangered, but now, for the first time, alternatives (although imperfect) are beginning to emerge.

The world’s largest financial institutions are in “adaptation and mitigation” mode. As always.

So far the industry’s efforts in implementing distributed ledger technology have been focused on substituting with or adding DLT to staging environments. Production use-cases are all but non-existent. Nonetheless, these efforts will surely continue. Their success, however, will be extremely limited. Blockchain technology, much like the cars and the internet, requires “infrastructure inversion” (from Andreas Antonopolus’s latest book “The Internet of Money”). Continued efforts to patch the old system will lead to more fragmentation and even more complexity.

Blockchain is not meant to support. It is meant to replace.

Troubles for DLT

Using blockchain for DLT projects is more or less the same as using any other available tech. They both will be competing for the title of “Newest patch” to an insanely complex and inefficient global payments, clearing and settlement system. It is hard and your worst enemy is the “cost/benefit” analysis.

The first glimpses of potential distress for DLT appeared recently when Banco Santander, Morgan Stanley and Goldman Sachs left R3CEV, the largest consortium on distributed ledger technology. That was followed by the unimpressive debut of the open-sourced Corda codebase.n nOpen-sourcing Corda was an interesting move. Asking developers for free support and at the same time planning to patent the most lucrative parts of the system is blatantly hypocritical.

Guys, this is what we have created so far. We are a bit stuck. Will you help? For the glory of it! We are the decades-long monopolies of value-transfer, you should be proud.

Let’s make slaves, slaves again. It would have been funny if it wasn’t ironic.

A call for efficiency

But there is something to this. It is more than obvious that R3CEV and distributed ledger technologists do not like the features of the Bitcoin network. They have been flirting with Ethereum, but found it to be insufficiently scalable. There is a reason for that. The environment they function in is very different than the future that public blockchain technology offers. Big finance needs limits and restrictions on the background of high efficiency. This is perhaps the essence of the problem.

Fundamentally, decentralized blockchain systems are not created to offer the former, while they have not yet evolved to a level where they offer the latter.

Openness stimulates innovation and provides opportunities. No self-respecting project in the cryptocurrecy/blockchain space will go against that. Decentralization and open access are key. However, efficiency, scalability, and industry-grade stability wrapped in an intuitive UI are the ingredients that will help public blockchains make a giant leap forward. A project lacking that will never produce a meaningful impact on a global scale and can never be considered to be even a theoretical substitute of the global PCS system.

How about a trustless, decentralized and purely functional oracle machine, whose transactional efficiency is limited only by bandwidth? Open to anyone and elegantly governed by all of its users.

This is æternity.

Want to learn more? Check out our website, dedicated to the whitepaper.

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