The $ 50M investment of Ripple in the blockchain search could change the digital payments

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At the start of this year, Ripple announced that it has dedicated $ 50 million to the University Blockchain Research Initiative (UBRI), in partnership with Ripple with 17 universities worldwide, from the UK to Brazil, with the goal of accelerating new innovations in blockchain and cryptocurrencies.

Among the main beneficiaries of Ripple, the June investment will be the Center for Blockchain Technologies (UCL CBT), world leader of the University of London. Executive Director Paolo Tasca predicts that research funded by UBRI will have a number of potential implications for the UK payment market, ranging from the rationalization of existing interbank payment infrastructures to the automation of regulatory and compliance procedures.

Tasca expects that one of the first major ways in which blockchain technologies can take hold is the improvement of the efficiency of regulatory reporting through the BARC (Blockchain Technology) project of UCL CBT, which will receive an injection of liquidity through the # 39; UBRI.

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"We believe this will be one of the most important blockchain financing projects for the British government," Tasca says. "The idea is to reverse the current regulatory and compliance models and use blockchain to allow a layer of communication between regulators and banks, so that regulators can automatically retrieve data or query the information they need, without having to rely on an intermediary or the bank reporting such information. "

The need arises because at the moment payment institutions still rely heavily on slow manual processes for reporting risk data. This hinders the ability of regulators to provide effective analysis and surveillance. However, a blockchain-based system would be much faster and more efficient, as the shared distributed ledger will act both as a transaction execution platform and as a means of immutably documenting transactional information, allowing access in time. real.

Following a successful experimental collaboration between UCL CBT, R3 and Santander in the development of a blockchain-based system for the reporting of mortgage transactions – a project launched in September 2017 – Tasca expects that UBRI will be able to a strong impact on the regulation of the landscape in the coming years.

"We believe this will be very promising and useful for the payments industry, both for the ordering forces, the market regulators, and to simplify things from a commercial point of view," Tasca says. "The success of the prototype project with Santander and R3 will help this, I believe that a market implementation of this is already in the pipeline."

But the potential impact of UBRI extends far beyond regulation. The researchers hope that funded initiatives can pave the way for customized blockchain systems to replace cross-border payment systems such as the Swift Global Payments Innovation program.

"This kind of technology could be of enormous benefit to end users," Tasca says. "It is definitely superior to Swift, in terms of transactions per second and cost per transaction In the years to come I think we will see an expansion of competition from different blockchain protocols".

While protocols like Stellar, and even Ripple itself, have previously been proposed as potential substitutes for Swift, those exact configurations may not be practical. In particular, Tasca suspects that to achieve a scalable and cost-effective blockchain-based payment system that can be used and considered reliable by all major financial institutions, it should be centralized. Therefore, many of the UBRI projects are dedicated to the design and simulation of different blockchain configurations, to find the optimal configuration for different payment infrastructures.

"We have to map risk levels in all kinds of conditions for each of these blockchains, because this has not been done before," Tasca says. "In this way it is necessary to examine many different network topologies, consensus mechanisms, delays in confirmation times and see how we can maintain the speed at which a payment arrives from A to B while minimizing the risk in terms of performance and security" .

At the same time, Tasca hopes that the UBRI will help address two of the main obstacles, the legal uncertainty and the lack of interpretability, which he said has hindered the adoption of blockchain-based solutions by of the main players in the payments sector so far. In particular, if a system is designed to work on a particular blockchain protocol, it is currently very difficult to interface that system with another that runs on a completely different blockchain.

"These interpretability challenges have made the industry cautious so far, as they increase the costs of developing a blockchain system and increase the risk for end users and the company," Tasca says. "So to encourage the use of these technologies, we will do a lot of work with regards to the standardization of blockchains, and the surveys have found that the biggest obstacles that prevent the proliferation of blockchains in finance have been the most important. Legal uncertainty: The current commercial and technical challenges are secondary to this: So far, very little has been done about the legal aspects of this, but we have many legal researchers at UCL CBT, so it is something we will look very closely in the coming years. ".

David Cox

David Cox is a freelance writer for leading organizations around the world including BBC, Guardian and New York Times.

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