A lack of scalability and privacy issues are preventing banks from using distributed ledger technology (DLT) to process cross-border payments, says a senior executive at one of the most prominent startups in the DLT space.
Ripple’s chief cryptographer David Schwartz told Reuters that: “I will concede, we haven’t gotten there yet.”
International payments have been identified by banks as a process that could be made faster and cheaper by new technology such as DLT. And while several banks are currently using Ripple’s bi-directional messaging service xCurrent, it “is not a ditributed ledger” said Schwartz.
This may be news to Ripple’s numerous banking clients, such as Banco Santander which used xCurrent as the basis for its cross-border payments service One Pay FX which was hailed as an early use of blockchain-based technology upon its release in April.
Distributed ledgers are based on the principle of immutable databases updated by a network of computers and secured by cryptography as opposed to the traditional model of a centralised authority.
XCurrent employs an “interledger” protocol which improves upon existing payment models and can offer instant settlement, However, it should not be seen as DLT which Ripple says lacks the scalability and privacy that banks and their clients require.
“What we hear from many of our customers is that its imperative to keep their transactions private, process thousands every second and accommodate every type of currency and asset imaginable,” said Schwartz.
“The feedback from banks is that you can’t put the whole world on a blockchain,” added Ripple’s senior vice president of customer success Marcus Treacher.