Blockchain or DLT (Distributed Ledger Technology) is one of the major transformations that we have seen recently in the field of technology. Being one of the most multifaceted and universal technology, it has managed to garner the attention of many businesses around the world. Although, Blockchain now finds application in myriads of the field usage in the financial sector remains the most conventional and popular one.
In this blog, I will be highlighting the latest development in blockchain in the financial sector. We are talking about Quorum. This is the most recent development which JP Morgan is bringing to the financial industry.
The inclination of big banks towards blockchain technology is unhidden. J.P. Morgan Chase has taken the initiative in this direction; it is one of the leading investment banks in the world. JP Morgan along with Ethereum Enterprise Alliance has come up with Quorum. It is a private blockchain which will be working as the bank’s new brain.
Why there is a need to develop such a system?
When we talk about Blockchain and its implementation in the financial or other sectors, then there are a few concern which bothers us. Issues like control of information, complete public transparency and access are a few concerns that banking and other financial institutions have when it comes to the blockchain. Although, blockchain offers features like immutability and easy traceability when it comes to the traditional banking system than relying on a system where the entire data would be visible to the public is bothersome. Apart from this, the threat of exposure to smart contracts is something which also concerns these organizations.
Well, Quorum is a move in this direction. JP Morgan has developed this with an intent to clarify all the apprehension surrounding the use of blockchain as a part of the mainstream financial transaction system. Another reason for the development of Quorum is to seal the gaps that blockchain has and to come up with a reliable and trustworthy blockchain platform.
What is Quorum?
As mentioned above, Quorum is an Ethereum based DLT. The objective behind this to provide a permissioned implementation of Ethereum which supports transactions and contract privacy.
The functioning of Quorum is similar to Ethereum but with a few differences. Here is how Quorum is different from Ethereum blockchain :
- Network and peer permissions management
- Enhanced transaction and contract privacy
- Voting-based consensus mechanisms
- Better performance
Let’s analyse these factors :
- Network and peer permissions management- When it comes to one of the remarkable features of Quorum then you must know that it is a permissioned system which means that the Quorum network won’t be open to all. Only the validated and authorised people can be a part of this network. Quorum has a permissioned chain of people in the system; the exchange takes place between participants who are pre-approved by a designated authority.
- Enhanced transaction and contract privacy– One of the key feature that banks look at is confidentiality of data. Well, the current technology of Blockchain or Ethereum that we use fail to give a complete guarantee of security of data. Since visibility and ease of accessibility is one, the key aspect of Blockchain, the banking and financial institutions restrain from using this technology. When it comes to Quorum, then its permissioned nature makes it a favourable concept. It introduces the concept of public and private transactions. The open transactions are similar to Ethereum but when it comes to the private transaction then it is confidential, and the data is not exposed to the public. One of the key features which make the Quorum superior to Ethereum or other blockchain platforms is Constellation. It is one of the important features of Quorum. It secures the messages by enslaving it. In this enclave, there are previous transactions authenticity and authentications. Most of the cryptographically-heavy work relay within it, thus making it a secure and safe mechanism.
- Voting-based consensus mechanisms- Unlike another blockchain mechanism. Quorum is based on voting consensus mechanism which is also known as QuorumChain. The functioning of this consensus mechanism is very simple; it delegates voting rights to others. To assign voting rights, QuorumChain makes use of the smart contract. It not only assigns the voting rights but at the same time, it also tracks the status of all the voting nodes. Quorum transactions include:
- Global Transaction Hash
- Public State root hash
- Block maker’s signature
- Better performance- When it comes to speed of transaction in Quorum then it is far more superior than its contemporaries. As per the development team, the system can easily suffice more than 100 transactions per second which are higher than Bitcoin and Ethereum. Thus, making Quorum the preferable choice for banking and other financial institutions. The reason for such high speed is its simple consensus mechanism which allows quicker transactions.
If we consider all the features of Quorum, then it’s an excellent tool for the banking companies. Although it works with the restrictive mechanism, this diminishes the trust issues which the banking and financial institutions have when it comes to implementing blockchain.