Bank of England and Chain Release a Fintech Proof-of-Concept for Data Sharing
With a view to enhance privacy of data sharing, the Bank of England and Chain are examining the DLT system opportunities.
By Julia SakovichUpdated
3 mins readPhoto: Andrew Milligan Sumo / Flickr
As it has become known, the Bank of England, Britain’s Central Bank, in cooperation with Blockchain startup Chain has released a Proof-of-Concept paper which analyzes the opportunities to ensure a safe and secure network for users where they will be able to share data.
With a view to examine this issue and to find out how distributed ledgers could be adopted to provide privacy in data sharing across a network, the bank entered into partnership with Chain, the startup that works on developing of infrastructure protocols.
Though the Proof-of-Concept wasn’t implemented into practice, it itself is aimed at providing academic understanding and overview, and is now viewed as a practical solution. But in the framework of their cooperation, both sides were preoccupied with the questions related to the development of a distributed network system.
In the paper we can find an ideal scenario in which the DLT system includes such essential participants as a central authority (a central bank can be a good example), a regulator, and several parties dealing with transfer of some asset.
The central authority needs to obtain the power to issue and retire new units of assets and provide all participants with access permissions. While oversight of all assets in the system should be the task of the regulatory authority. The regulator is the only party that would be granted with an opportunity to see the details about the transaction in which it doesn’t participate. As for hacker attack, with a view to decrypt data, intruders would need to find the private keys for each transaction, which is quite a challenging task.
Before conducting this research work, the bank has set such key goals as, for example, to explore whether there is a possibility to configure DLT based systems in a way that only the regulator would have an access to details about transaction and participants in consensus process would have a limited visibility of transactions details. Another goal of the bank was to find out how privacy settings could affect the working process of the system and what challenges and risks they could bring.
The Bank of England named this scenario an ideal case for enhancing data sharing privacy among users and highlighted that though such a scenario is theoretically possible, it’s still far from being implemented right now. The trade-offs still need to be explored further with a special focus on such aspects as speed of transaction processing, scalability and risks related to the applied cryptographic techniques.
The paper has been released just after the Bank of England announced its plans to take a DLT solution as the basis for the next version of its gross settlement system. Nevertheless, according to the bank, currently, DLT tech is still not mature enough to be implemented but it has a great potential to become a priority technology in the future.
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