Accenture is courting controversy in the blockchain community by patenting a technique for editing information stored using the nascent technology in a move designed to make it more commercially viable.
By allowing a central administrator to amend or delete information stored on a blockchain, the consultancy says that its prototype — to be unveiled on Tuesday — will make the technology more attractive to the financial services industry.
However, to many diehard fans of the technology underpinning the cryptocurrency bitcoin, the move threatens one of its founding principles: that a blockchain should be an immutable ledger of events without the need for a central authority.
Blockchain technology is a complex set of algorithms and cryptography created to allow bitcoins to be traded and verified electronically over a widely distributed network of computers without a central ledger.
Having initially been sceptical about it because of worries over fraud, big banks are now exploring how they can exploit the technology to speed up back-office settlement systems and free billions in capital tied up supporting trades on global markets.
Richard Lumb, global head of financial services at Accenture, told the Financial Times that financial institutions and regulators would need a means to quickly correct errors on the blockchain before using it in securities markets. He gave the example of a “fat finger” trading error, or a trade assigned to the wrong counterparty.
This prototype allows you expunge a record completely and we think that will be needed by corporates and regulators
– Richard Lumb, Accenture
“What we are talking about is adapting the blockchain to the corporate world and how do we make it pragmatic and useful for the financial services sector,” he said. “This prototype allows you expunge a record completely and we think that will be needed by corporates and regulators.”
He drew a distinction between the need for an editing function on the invitation-only, “permissioned” blockchains that most banks are looking at establishing and the open, “permissionless” blockchains, such as bitcoin, where immutability is a key feature.
Accenture and Giuseppe Ateniese, a professor at the Stevens Institute of Technology in New Jersey, have filed a patent for their technology in the US and Europe. It uses a technique called the “chameleon hash” to add a type of padlock between units in a blockchain that allows an administrator with the key to unlock and edit them.
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Mr Lumb said the prototype would have provided a quick solution to the problem of how to recover the more than $50m stolen this year from the DAO, a crowdsourced venture capital fund using the Ether cryptocurrency.
Blythe Masters, the former JPMorgan banker running Digital Asset Holdings, a blockchain specialist, has reviewed Accenture’s prototype. “Accenture’s approach is one of several options in the toolbox,” said Ms Masters. “But we think it is innovative and can strike the right balance between preserving blockchain’s key features and adapting it for real-world requirements within some permissioned systems.”
After Mr Lumb wrote about the need to edit the blockchain in the New York Times last week, he has been criticised by several bitcoin supporters.
Rocky wrote on the Crypto Hustle website: “The narrative of mutable private blockchains may be a symptom of financial institutions trying to use technology that was never built for them. In fact, the entire purpose of a blockchain is to circumvent those very institutions.”