Escape the blockchain hive mind with the interoperability of the Interledger Protocol. Image: Shutterstock
“In a blockchain, everyone has to think the same,” states Stefan Thomas, an open-source developer, distributed systems advocate, and CTO of Ripple. In his recently published article on Medium, titled, “The Subtle Tyranny of Blockchain,” Thomas discusses the complexity of blockchain systems, recognizing the integration and technical support requirements, particularly in regards to transaction banking.
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However, he asserts that transitioning from a centralized to a distributed ledger is worth the time and effort to achieve interoperability between payment networks. No single blockchain can prepare for the diverse sets of use cases in the worlds of payments, trade finance, securities or lending, which is why financial institutions need a modern infrastructure that interoperates between networks to better serve their clients.
Recalling his frustrations with the political nature of the Bitcoin community, of which he was once a member, Thomas advises that protocols remain flexible enough to be incrementally improved upon, much like the Web itself.
“Instead of blindly replacing centralized functions with blockchains, we should be thinking about ways to avoid having those functions be centralized to begin with.”
Thomas concludes the article by promoting the advantages of the Interledger Protocol, including the ability to select a preferred ledger and currency, and set the level of anonymity—without losing the ability to easily transact with someone who has made different decisions.
The push for interoperability between ledgers is supported by a variety of organizations and initiatives within the financial services industry:
- Research firm Celent states that interoperability will allow stakeholders to maximize liquidity while minimizing the operational risk of transition.
- The Consultative Group to Assist the Poor (CGAP) reports that regulatory agencies must support interoperability to lead efficient industry-wide actions.
- The Single Euro Payments Area (SEPA) plans to enable interoperability by standardizing real-time payment systems across 28 European countries by November 2017.
To learn more about the technical evolution of blockchain and the development of the Interledger Protocol, read the full article by Stefan Thomas here.