Royal Bank of Scotland Tests Ethereum For Domestic Payments
The continuous support for Ethereum and blockchains from world banks continues to grow.
The Royal Bank of Scotland (RBS) has developed a project, known as Emerald, testing the Ethereum blockchain and its smart contract platform. The Innovation Team at RBS constructed a Clearing and Settlement Mechanism (CSM) on the Ethereum blockchain to test the technology and evaluate possible limitations.
With Emerald, RBS hopes to alter the current domestic and international payment system. Its design was “to explore the creation of a Deferred Net Settlement (DNS) system like FasterPayments using distributed ledger technology.” The integration of distributed ledger technology, or a blockchain, with payment systems would not only erase human error, but it will protect the bank and its customers.
A public ledger will provide transparency and lower fees, and will minimize settlement risks for all payments. When it comes to transactions between banks, Emerald will track and limit each bank’s balances. For example, if Bank A wants to borrow money from Bank B, the system will check Bank A’s balance. If Bank A is over it’s limits, the request is denied. If the request is within the parameters, Bank A will be granted the money.
In its technical paper, RBS explains that it chose to test the Ethereum blockchain because the smart contract platform has proven to be one of the best on the public domain.
The paper continues:
The developers liked the idea of the freedom of a smart contract platform, where the smart contract defines the functionality, over a specific product which is well suited to this application but has less inbuilt flexibility.
However, the test found that Ethereum needed some adjustments in order to fit within Emerald’s requirements. This lead the RBS team to test the project on a private blockchain instead.
“The test results evidenced a throughput of 100 payments per second, with 6 simulated banks, and a single trip mean time of 3 seconds and maximum time of 8 seconds. This is the level appropriate for a national level domestic payments system,” as stated in the technical paper.
As of right now, Emerald is a private ledger. But with a few modifications, RBS plans to make the project an open source platform.
The Royal Bank of Scotland is fairly familiar with blockchain technology and its capabilities. RBS was one of the first major banks to join the R3CEV consortium last year. The startup, including RBS and 49 other financial institutions will work together to develop a standard for blockchain technology. RBS was also one of nine banks to test a distributed ledger on Ethereum with R3CEV. It was hosted on a private network on Microsoft Azure.
RBS’s support of blockchain technology does not end here. A month after joining the R3CEV consortium, RBS announced they were experimenting a possible in-house cryptocurrency.