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Blockchain technology is a step from messaging
By R Vivekanand, Co-Head
of TCS Financial Solutions
networks like SWIFT toward highly-effective
information-sharing networks that have
embedded algorithms in the form of smart
contracts.
The more people connect to a network, the more
Blockchain amplifies the value of network
valuable it becomes.
effects. With blockchain, each new additional
node on the network represents not just another
That’s the Economics 101 idea of “network
effects.” For example, whenever anyone gets a endpoint that may be reached, but also the
telephone for the first time, the value of your own promise of a continued flow of new data into
telephone increases by an infinitesimal degree. a shared distributed ledger. As participants
Even if it’s unlikely that you will ever do so, you contribute their own information into a distributed
may call or message that person directly, which shared ledger, other network participants gain
accrues positive economic value to you and to near-instantaneous access to a single version of
every person with a telephone. the truth, replicated within their own environments
for their own use.
The same principle applies for any other
Blockchain curtails the need to exchange
networks, whether social networks or interbank
networks such as closed-loop payments, clearing messages. For the most frequently-asked
and settlement networks, credit card networks, or questions, the answers will already exist in your
SWIFT. Each new member increases the value of own environment. Messages become less frequent,
the network to all participants. tending toward higher-value discussions.
Messaging is the main driver of complexity for
Yet there’s an important distinction to be made
between messaging networks and information- financial institutions seeking to drive operational
sharing networks. It’s the difference between efficiency with straight-through processing (STP). IT
asking for someone’s phone number and sending specialists must anticipate every possible outcome
a friend request through a social network. If you for every message exchange, and organizations
have someone’s phone number, you can call or text. must establish extensive operational procedures to
If you connect through a social network, you can deal with the inevitable exceptions. Lacking a single
find out everything that person has ever shared, source of information, messages must be carefully
including photos, how far they’ve walked today, and exchanged simply to validate whether the data on
what they’ve had for dinner. These networks may hand is correct, and then to reconcile any errors that
coexist and complement one another, but they have arise during the data duplication process.
Messaging itself takes time. When you send
very different usage patterns.
In a messaging network, each node acts as the
repository of its own information, which implies as to when you’ll receive a response, if at all.
that messaging is the core activity on the network. Organizations cope with this through quality-
If you want information about another node, you of-service (QoS) guarantees and other network
must send a request and wait for a reply. management practices, but this adds cost and
complexity, and increases settlement times.
In an information-sharing network, each node
Blockchain technology eliminates the need for
contributes information in a standardized format
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someone a message, there’s no built-in guarantee
to a repository, in advance of any requests made back-and-forth messages. Once the data you
from other nodes. This reduces the need for node- require is automatically included in your local copy
to-node messaging, while amplifying the power of a distributed ledger, you no longer need to wait
created by the ecosystem. for responses from counterparties. You can also
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