Japan’s biggest bank has codeveloped a new blockchain, or distributed financial ledger, to boost the speed and lower the cost of payments.
Over the past year and a half, Mitsubishi UFJ Financial Group, or “MUFG” for short, partnered with Akamai, a U.S. tech company, to design a blockchain that can handle 1 million transactions per second at latencies of less than 2 seconds, meaning the time it takes to confirm a batch of transactions on the ledger, the companies said. They expect the service to be capable of handling 10 million transactions per second as they continue to improve the technology, they said.
In contrast, Bitcoin, the original cryptocurrency backed by the world’s first blockchain, can process seven transactions per second at latencies exceeding 10 minutes.
Unlike Bitcoin’s blockchain, MUFG and Akamai’s is “permissioned,” meaning that only verified computers can join the network that orders and confirms payments. The blockchain is built on Akamai’s cloud service, called Akamai Intelligent Platform.
Blockchain technology has been a hot theme among banks and other companies looking to revamp their databases. The trend has attracted interest from big names, such as JPMorgan Chase, Walmart, IBM, Maersk, Daimler, Airbus, and plenty of corporations in between.
“For years, the financial industry has sought to utilize blockchain to secure and hasten transaction processing, and lower associated costs,” Nobuyuki Hirano, president and group CEO of MUFG, said in a statement. His firm is confident, he said, that the new tech will “support significantly greater volumes of high-speed payment transactions without compromising the level of security required to combat fraudulent transactions.”
Andy Champagne, chief technology officer of Akamai Labs, an R&D unit at the tech firm, said that the blockchain his team co-created with MUFG is best suited for making traditional payments online. He said he eventually expects the tech to help pave the way for “micropayment-type transactions,” where many people pay frequent, minuscule fees for services, like paying a few cents to read an article on a website, as well as “Internet of Things”-style payments, where connected devices operate autonomously, like a washing machine automatically placing an order for more detergent when supplies run low.
“We expect to roll forward on the payment network application with Mitsubishi in early 2020,” Champagne said.
MUFG has been one of the most bullish big corporations to dabble in blockchain tech. The bank is planning to test its own cryptocurrency in the months to come, as Manichi, a Japanese newspaper, reported earlier this year. The firm also invested in Coinbase, the biggest U.S. cryptocurrency exchange, and has worked on blockchain pilots and projects with IBM, financial industry consortium R3, Japanese conglomerate Hitachi, Japanese IT firm NTT Data, and digital payments firm Ripple, among others.
Tom Leighton, Akamai’s CEO and cofounder, said in a statement that the jointly developed blockchain should address technical obstacles, like security and speed, “that have to date hindered broader use of blockchain.”
Champagne said Akamai filed for patents covering the tech at the end of last year.
