‘Blockchain, not Bitcoin’ is Dead? Australian Bourse Cans DLT Shift

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The Aus­tralian Secu­ri­ties Exchange (ASX) has placed a blockchain sys­tem (DLT) intend­ed to upgrade its aging set­tle­ment lay­er on indef­i­nite hold after three years of development.

The move marks the end of what was to be one of the most impact­ful imple­men­ta­tions of dis­trib­uted ledger tech­nol­o­gy — busi­ness-speak for enter­prise blockchain — to date.

In a state­ment on Wednes­day, ASX said its DLT, once pegged to replace its 25-year-old Clear­ing House Elec­tron­ic Sub­reg­is­ter Sys­tem (CHESS), sim­ply didn’t mea­sure up.

ASX inked a three-par­ty mem­o­ran­dum of under­stand­ing in 2019 with enter­prise blockchain firm Dig­i­tal Asset and cloud com­put­ing giant VMware to build the software.

Between 245 mil­lion and 255 mil­lion Aus­tralian dol­lars ($165 mil­lion to $171 mil­lion) spent on devel­op­ing the DLT will be scrubbed from ASX’s bal­ance sheet start­ing next year, a spokesper­son told Blockworks. 

The funds were pre­vi­ous­ly list­ed as a finan­cial asset or lia­bil­i­ty. ASX doesn’t expect the out­come to impact the company’s dividends.

DLTs are pri­vate (per­mis­sioned) blockchain-pow­ered net­works; data­bas­es involv­ing mul­ti­ple vet­ted par­ties across mul­ti­ple trust­ed nodes, which process actions with­in a closed system. 

Large com­pa­nies and oth­er insti­tu­tions have grav­i­tat­ed towards DLT solu­tions rather than per­mis­sion­less blockchains, as they award supreme pow­er and con­trol over the net­works they sup­port, with “blockchain, not Bit­coin” the mantra for many over the past five years.

Com­pare that with pub­lic (per­mis­sion­less) blockchain sys­tems such as Bit­coin and Ethereum. These net­works have no cen­tral pow­er and allow any­one at all (with the right equip­ment) to join, val­i­date and oth­er­wise par­tic­i­pate in the network.

The ASX spokesper­son said that while cur­rent activ­i­ties on the project have been paused, it has not defin­i­tive­ly ruled out a DLT imple­men­ta­tion in the future. 

“As we revis­it solu­tion design we will go back with an open mind,” the spokesper­son said. “We will eval­u­ate a num­ber of options and we will work with both [Dig­i­tal Asset] and VMware in those investigations.” 

ASX repeatedly pushed back its DLT blockchain system

The Aus­tralian bourse, which han­dles clear­ing, set­tle­ment and reg­is­tra­tion of secu­ri­ties and equi­ties in the coun­try, first began explor­ing options to replace CHESS more than sev­en years ago. 

Toward the end of 2018, DLT was tipped as the tech­nol­o­gy of choice to help mod­ern­ize its sys­tems, lead­ing to a for­mal agree­ment to devel­op a blockchain-based solu­tion a year later.

Some ASX cus­tomers ini­tial­ly balked at the idea, com­plain­ing that the blockchain imple­men­ta­tion could ulti­mate­ly fail. The exchange delayed the imple­men­ta­tion sev­er­al times due to con­cerns over exact­ly how the new sys­tem would function. 

The tran­si­tion was ini­tial­ly slat­ed to go live in 2020. Cit­ing sig­nif­i­cant chal­lenges posed by the design, ASX’s deci­sion to can its DLT stemmed from a review under­tak­en by IT con­sult­ing giant Accen­ture, which was start­ed in August this year and issued ear­li­er this month.

Accen­ture said dis­trib­uted sys­tems intro­duce high­er laten­cy, exac­er­bat­ed by mul­ti­ple lay­ers includ­ing client nodes, CHESS’ appli­ca­tion and the ledger itself, where trans­ac­tion­al data is stored.


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