Permissioned networks are the ideal solution for banks in building their own blockchain. In this article, we will detail the technical advantages of banking blockchains and how these advantages lead to financial advantages, as well.
In what follows, we summarize the difference between public and private blockchains:
|Public Blockchains||Private Blockchains|
|Access level||Anyone||Members of an organization|
Not Anonymous: Identities are known
Proof of work
Proof of stake
|Consensus through pre-approved participants
Permissioned blockchains have many technical advantages:
Finally, a permissioned blockchain retains most of the ‘positive’ aspects of the blockchains:
Permissioned blockchains have several financial advantages, with many of them coming from the technical advantages they provide. Generally, they reduce costs because they remove intermediaries, which becomes unnecessary in the blockchain protocol.
A Santander FinTech study showed that permissioned blockchain networks could reduce bank infrastructure costs between US$15 billion and $20 billion per year in 2022.
In a blockchain network, there is no need for complicated audits since the blockchain maintains its own permanent ‘audits’ and directly publishes transactions through the blockchain. This obviously reduces costs since bank external audits, which are of course mandatory, can be extremely expensive
Some slower, expensive payment networks with a quasi-monopolistic position can also be bypassed with the permissioned blockchains. This also reduces costs for banks.
Maintenance costs for the networks are also reduced since, for many aspects, the blockchain network can ‘self-maintain’ itself.
Permissioned blockchains have impressive technical and financial advantages in the context of the banking industry. They can reduce overall costs in a very efficient way.