Ripple CTO: The basic principles of blockchain itself prevent it from being widely used

Over the past few years, blockchain technology has become the most popular trend in financial technology, thanks to the contributions of major banks and financial institutions in the development of blockchain products. However, the financial industry has been unable to demonstrate a working application of blockchain technology. Ripple CTO Stefan Thomas believes that the problem lies in the basic principles of the technology itself.

Despite the hype surrounding blockchain technology from the world’s leading financial organizations, the technology itself has received criticism from financial experts who believe it is not applicable to the traditional financial sector. The economic and financial benefits of blockchain technology are minimal compared to the costs of developing it.

Based on the blockchain-based technologies and applications that banks have created over the past few years, the limitations of blockchain technology are quite clear. The technology is very expensive to implement and requires every network user to reach consensus on a set of rules and policies. If the established framework is broken, the entire network will shut down.

Ripple CTO Stefan Thomas, who has been involved with Bitcoin and blockchain-based systems since early 2011, explained the fundamental mistake that companies and organizations in the financial industry make is that they want to use blockchain to replace the vision of centralized functions. Instead, Thomas believes that banks should look for ways to avoid using centralized functions from the beginning.

Thomas wrote in a blog post:

“Rather than blindly using blockchains to replace centralized functions, we should consider ways to avoid centralizing those functions in the first place. We need to create borderless protocols, like the Web, that incrementally improve the system from different perspectives.”

To support this claim, Thomas uses the World Wide Web and Xanadu as prime examples. Just a few decades before the web was introduced, Xanadu emerged as a large network with some exciting features and services.

The Web shrugged off the complex infrastructure of the Xanadu network, and over time the Web has remained dominant simply because its minimalist protocols supported simpler data formats; the Web simply gave users more freedom and independence to operate alongside Xanadu in person.

Blockchain networks operate in exactly the same way. Network users are given the freedom and independence to create their own transactions, settle assets, and record immutable data. Blockchain networks are difficult to implement in existing systems and infrastructure because of their arcane political nature, which requires everyone on the network to agree on certain rules.

This means that the entire concept of permissioned blockchain networks should collapse and banks must focus on the decentralized nature of blockchain technology.

Thomas also said:

“Shared state adds a huge amount of complexity, with a big implication for developers: blockchain is a pain to work with. Everyone who has worked on blockchain knows what I mean. In fact, blockchain has been largely ignored by large technology companies and embraced by the financial industry, in part because that industry has a fairly high tolerance for arcane and complex systems.”

Financial technology or systems expect developers to integrate blockchain networks and run them in parallel with their financial systems. There is a common fallacy among banks and financial institutions that blockchain technology will enable zero-cost, cross-border, cross-network and encrypted transactions for users.

What Thomas and other experts are suggesting is that banks must learn to give up the idea of ​​regulating a technology or network that operates in a truly decentralized manner. A blockchain network without harmony and consensus from the community and the network is of no value, and that is also attributed to the permissioned blockchain system of banks.