Are mutable blockchains the future of financial markets?

Blockchain is the underlying technology of the cryptocurrency Bitcoin and is well known for its unique way of generating transactions. But recently, an editable version of blockchain has caused heated discussion.

Consulting firm Accenture is applying for a patent for a system that would allow managers to modify information stored on a blockchain. Richard Lumb, Accenture's global head of financial services, told the Financial Times that such a change would make blockchain "more pragmatic and useful," ultimately making it "more suitable for commercial use."

Accenture's goal is to create a permissioned blockchain. As the name suggests, a permissioned blockchain requires an invitation from a relevant institution. Most banks currently prefer this type of blockchain. The private blockchain is the exact opposite of the public blockchain (permissionless blockchain). The Bitcoin system is a representative of the public blockchain, and its transaction records are irreversible. Accenture insists that its modification function will only be used to deal with some "extreme situations" in order to reverse some difficult errors.

Blockchain enthusiasts were not impressed by Accenture’s claims. Gary Nuttall from consulting firm Dislytics said:

An editable blockchain is a database. The significance of blockchain lies in its immutability, and Accenture has completely destroyed this.

Accenture's system may be very attractive to large banks. Although this change makes blockchain enthusiasts unhappy, they can only swallow their anger.

However, edited records cannot be deleted. Financial institutions must comply with legal requirements to ensure the integrity of transaction records. Therefore, even if they can modify records privately, they must ensure that the information format is consistent in order to comply with relevant regulatory requirements.

This is not the first time that companies have weighed in on blockchain. Clearly, many banks have been attracted to the technical features of Bitcoin. For example, they have borrowed Bitcoin’s technology and tried to use it for their own purposes – using private blockchains to make their systems more efficient and better at handling multiple currencies.

At the same time, the Accenture news is a nice reminder that technology can and should evolve. Changing the fundamental characteristics of blockchain may anger many early backers, but they can adapt to market needs, step out of the nerd zone, and devote themselves to the system that the banking industry advocates.