R3 Blog Identifies Blockchain Limitations and Takes Different Approach – A Must Read Blog!

by Tim Sloane 0

This must read blog from R3 reinforces Mercator’s research arguing that most blockchain applications being discussed today could be deployed at lower cost using a different architecture. If you are involved in any way with a blockchain evaluation, you must read this blog.

Richard G. Brown, the Chief Technology Officer for R3 uses almost the exact same thinking Mercator has applied, which argues that first you need to know what problem you are trying to solve, and only then can you select the most effective technology to address the business problem. This is how Mr. Brown stated it:

“The reality is that solutions based on selecting the design first and then trying to apply it to arbitrary problems never work out well. Every successful project I’ve worked on started with the requirements, not some cool piece of technology, and I was determined to bring that discipline into our work at R3.

As a result of this approach, the R3 consortium has dumped the blockchain as the building block for R3, but has also taken advantage of key learnings from the Bitcoin experiment, which should come as no surprise since Mike Hearn, who was a lead developer for Bitcoin until he quit in January 2016, is now the Director and Lead Platform Engineer at R3. Here again is how Mr. Brown states the decision to take a different approach:

“Notice some of the key things: firstly, we are not building a blockchain. Unlike other designs in this space, our starting point is individual agreements between firms (“state objects”, governed by “contract code” and associated “legal prose”). We reject the notion that all data should be copied to all participants, even if it is encrypted.

Secondly, our focus is on agreements: the need to link to legal prose is considered from the start. We know there will still always be some disputes and we should specify right up front how they will be resolved.

Thirdly, we take into the account the reality of managing financial agreements; we need more than just a consensus system. We need to make it easy to write business logic and integrate with existing code; we need to focus on interoperability. And we need to support the choreography between firms as they build up their agreements.

This blog is a refreshing change from the marketing hype that has been spewing into the market under the pressure of venture capital dollars pumped into startups.

The blog identifies five features that are considered fundamental to Bitcoin’s implementation. Mercator disagrees with that list having identified more features, often intertwined with each other, but still important to take into consideration when evaluating a new blockchain application. Still, this blog is a fantastic starting point that will hopefully establish a guide for evaluating the suitability to purpose for the hundreds of Blockchain startups making huge marketing claims.

Mercator would also like to see more transparency and openness from the R3 consortium. Promising to make offer its software to the open source community is not leadership. Leadership is accomplished by sharing findings as they are discovered and making them available beyond the software community by disseminating research papers. Of course we also recognize that R3 is a consortium that has no need for publicity or public approval, so perhaps they are less interested in being recognized as the leader that they are.

Startups that make the extraordinary claim that they have a Proof of Work replacement that reduces transaction times and the distributed cost of maintaining trust should be required to have extraordinary proof. At minimum this means publishing a paper that is as comprehensive as that published by Satoshi Nakamoto. Any startup that succeeds in producing the same level of trust as that implemented by the Proof of Work algorithm at less cost will almost certainly be awarded a Nobel Prize. Mercator recognizes that many brilliant people are working on this problem, but as far as we know today, no such white paper has been written.


Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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