Opinion: Dave Hrycyszyn, director of strategy at Head London, takes a technical and practical look at blockchain tech in FS.
Alternatively George Danezis and Sarah Meiklejohn at University College London, working with the Bank of England. They believe that the scalability and energy usage problems stem from that BitCoin is a completely distributed crypto-currency.
Their solution? Be less distributed. They’ve built an experimental version of their currency, called RsCoin. It reduces transaction processors to a few hundred, and uses a trusted central bank to hold a copy of the ledger.
RsCoin uses hashing techniques to sign transactions, leading to far lower energy usage than BitCoin. Due to being more centralised, it handles larger transaction volumes: 700 transactions per second, and scaling linearly as more processors are added. This is less than VISA (2000 to 7000 per second), but well in excess of PayPal (100 per second).
What does all of this mean for regular people?
Digital currencies could replace a lot of double-entry cash and card transactions. A widely-adopted digital currency would dramatically lower the transaction costs for keeping secure accounts. It could make the accounts of major organisations more transparent.
This might spur major changes in the banking industry; however, it might not matter much to the retail banks’ bottom line. They make much of their profit not through transaction fees but through value-added services for the well-off, or by grinding late payers with service charges.
Banking might not be the only industry worth thinking about when it comes to the effects of digital currencies. It relies on a combination of privileged access to information, expert knowledge, and special regulatory and legal provisions to protect the security and integrity of transactions. Accounting firms, lawyers, notaries, and others with similar conditions could see parts of their work effectively taken over by cryptographic signing.
Financial and legal advice, in contrast, might remain relatively untouched.
One thing worth considering is despite small attempts like Apple Pay, the big internet companies (Google, Apple, Facebook, and Amazon) have not yet weighed into the digital currency space in a serious way. They are, however, perhaps the best-placed to actually go ahead with their own new forms of money, implemented in a way which integrates with their existing services.