Private permissioned networks such as the ones being created by exchanges in Hong Kong and Australia will not consume energy at the worrying rate that public ledgers do, according to blockchain provider Digital Asset.
Despite being lauded for its potential to revolutionise the financial ecosystem, concerns remain over the energy use of blockchain after widespread reports of its impact on the environment.
A recent report from Nature Climate Change shoed how projected Bitcoin usage, could produce enough CO2 emissions to push global warming above 2 °C within less than three decades.
Speaking at Sibos 2018, Blythe Masters, CEO of Digital Asset, said that there is a big difference between energy consumption from private and public networks.
“The reason for that extraordinary consumption of resources in the case of the public Bitcoin network is because it is a completely open network,” said Masters. “As such it has to be assumed that there are adverse actors present and therefore a mechanism that had to be invented to enable the users of this network to trust that when they interacted with it, the record of who owns what would be accurate.
“In the case of a private permission network you just need to detect fraud with certainty, not prevent it.
“You still need to have it resilient to operational failures but you don’t need to have resilience to fraudulent actors, and because of that you are able to radically reduce processing power.
Digital Asset has been working with the Australian Securities Exchange (ASX) to replace the venue’s equities clearing and settlement platform.
In a more recent development, the Hong Kong Exchange and Clearing (HKEX) confirmed this week that it is partnering with Digital Asset for a new post-trade platform using the technology.
HKEX will trial the technology to help complete post-trade allocations and processing for northbound trades under Stock Connect within a tight settlement window.
As more projects get underway throughout the world, the topic of energy consumption is likely to be brought up frequently in a financial industry increasing its focus on environmental protection.
“Good for you for asking the question and being serious about this stuff, because it is an issue,” said Masters to the moderator at Sibos.
“The really relevant comparison is not what is not between what a DLT system built here compared to Bitcoin blockchain, because there is no comparison.
“You should compare it to what is going on today, million lines of code on mainstream hardware and infrastructure, that is a lot more expensive. This is a not-capital intensive technology.”