SBI Sumishin Net bank has conducted a test of replacing their ledger systems with blockchain technology, and it turned out to be fully applicable to their actual business. For their blockchain infrastructure, “mijin,” provided by Tech Bureau Inc. was used. SBI Sumishin Net bank has conducted 3-months long demonstration experiment with Dragonfly Fintech and NRI from December 2015.

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Unlike other cases where tests were done in securities systems, this time it is application of blockchain technology to accounting systems by SBI Sumishin Net bank. Ledger systems refer to systems processing ledgers centrally controlled by the bank, and they are core systems which control deposits and withdrawals, balance inquiry, ATM, and connections with outside systems.
According to the statement, in the demonstration experiment, 2.5 million virtual bank accounts and environment with capacity to process 90,000 transactions every hour were built. 6 nodes was set up in AWS, fault tolerance and availability were tested, and it was confirmed that everything went smoothly. There are many cases all over the world using blockchain technology for securities systems such as non-listed securities, syndicate loan, and repo etc. but the case of use in banking service was world’s first which is publicly known.

At the beginning of April 2016, financial institutions such as JP Morgan Chase, Citi group, and DTCC have succeeded in using smart contract in trading process for CDS (Credit Default Swap), it was reported. But their experiment was done in lower-than-actual transaction environment, and evaluation with actual environment is a phase yet to come. Therefore, the demonstration experiment by SBI Sumishin Net Bank can be considered as cutting-edge project ahead of all others in blockchain applications.

“People thinking in terms of doctrine often accuse blockchain technology of not being applicable for real-world use”, Takao Asayama, CEO of Tech Bureau Corp. told BTCN. “But if you look at actual-use aspect, although you can’t say absolutely zero downtime, this technology which can achieve 0.99999 certainty with minimum cost could transform the revenue model of the banks. In the most extreme instance, the business can thrive on advertisement revenue only, with zero fees like Robinhood (stock investment app.)

Also, according to Lon Wong of Dragonfly Fintech, “the outcome of the test shows that blockchain can be used for the core banking system. The Mijin/NEM Technology makes it easy to integrate with the core banking system. In fact, it should coexist with legacy core banking systems, run in parallel, and finally replacing them in the long term.”

By using mijin, the cost and hassle of failure and disaster countermeasures can be drastically reduced. Also, according to Mr. Asayama, blockchain is a technology closer to accounting systems than post-trade processing which requires smart contracts etc. Of course, utilization of blockchain in financial markets is useful in the sense that it can automate complex processes of derivatives conditioning and auditing. But in this age of IT, current mainframes which incur tens of billions of yen have already become an liability, and many financial institutions will soon face the need to switch their systems to new ones. The study results that “blockchain technology can be used in banking ledger systems” this time, can unleash global paradigm shift, not just in Japan. Asayama continued, “I am repeating myself but, although you can’t claim blockchain technology is absolutely zero downtime, but it is, in effect. So the paradigm change is from “spend fortune to protect it” to “when failure, replace cheaply”. And the accounting systems which aims for realtime settlements are more intensive than post-trade, so our successful demonstration experiment has global implications.”

According to Asayama, the version of mijin used for demonstration experiment this time had capacity to achieve 4-digit transactions per second while geographically dispersed. The updates is in the works, and its capacity is expected to improve.

Daisuke Yamazaki

April 16, 2016

This article is a translation from the Japanese article “住信SBIネット銀、基幹システムにおけるブロックチェーンの利用に成功 テックビューロの「mijin」利用” at BTCN – Bitcoin News.

 

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