The consulting company Accenture has come up with a way to render the blockchain — the technology behind Bitcoin — more palatable to the world of high finance. The innovation: Make it not a blockchain. One of the defining features of the blockchain is its immutability. Numerous computers retain identical copies of a permanent, encrypted record of each transaction. Nobody can go back and make changes, so no central authority — neither a government nor a bank — is needed to guarantee the transactions’ legitimacy. This permanence, though, can be a problem in financial markets. Humans are prone to error, and it would be terrible if such errors could never be amended or undone. Imagine what would have happened in the wake of the 2010 Flash Crash if exchanges hadn’t been able to cancel thousands of erroneous trades. Enter Richard Lumb , Accenture’s chief executive for financial services, with a prototype for a fully-redactable blockchain . It’s essentially a clone of the Bitcoin protocol, augmented with a trapdoor function that creates a master key to modify or delete any existing entry. The modification isn’t easy: Remember, the record is maintained on numerous computers around the world. Redactability requires the creation of a governing authority, which instructs all the participants to discard the current blockchain and download a new version from a designated source in the event of an edit. In the case of Bitcoin, downloading an entire blockchain can take days. Accenture proposes to address the issue by “compressing” the blockchain in a way that replaces series of transactions with a computed result. It’s like recording an account balance without storing the full transaction history. In other words, Accenture has solved the blockchain’s immutability problem by creating a giant, horribly inefficient Excel spreadsheet. Which raises another question: When will […]
