Financial Services and Blockchain: Why Performance Matters

In an important milestone for the blockchain industry, we have recently seen a 40 million USD securities contract issued on Ethereum. Despite the enormous hype behind blockchain, high-value use cases of this type have been conspicuous by their absence over the last few years. In this blog post we ask why it has taken so long for blockchain to reach this milestone and whether this marks the start of a new era for financial products on blockchain.

Blockchain Advantages

Let’s start with the positives: blockchain offers many advantages over legacy financial systems, notably in terms of cost, efficiency, security and transparency. These benefits explain why the financial services industry is expected to see the first commercial use cases of blockchain.

If blockchain is so impressive, why is it taking so long for real products to be built on it? As any user of the technology will know, today’s leading blockchains suffer from a serious scalability problem. Measured in transactions per second (TPS), neither Bitcoin or Ethereum can process more than about 15 TPS. When these blockchains become congested with transactions (as they inevitably do), transaction fees rise, latency increases and this creates a huge delay in average transaction confirmation times.

Other blockchains claim to reach the thousands of transactions handled each second by VISA, yet none have been able to demonstrate this level of performance with a commercial product. Before the financial services sector can embrace blockchain, this has to change.

Beyond TPS

Commercial use cases for blockchain technology require more than just a ‘bigger pipe’; the ability to handle large transaction volumes is just one piece of the jigsaw. Latency is a crucial consideration for many financial products, alongside transaction fees and finality. Taken together, blockchain must match or exceed legacy solutions in all of these key areas before widespread adoption can take place.

In response to this clear market need, hubii created nahmii — the world’s first commercially-viable blockchain scaling solution. Our approach is blockchain agnostic, allowing businesses to make transactions across different blockchains all within one platform. Most importantly, nahmii is the only blockchain protocol to address all four of the key performance issues highlighted here: capacity, latency, finality and transaction fees.

The time is right for blockchain to provide a new and improved infrastructure platform for the financial services industry. As seen in the last week, the concept of blockchain-backed securities has been proven. Now we can combine these use cases with the performance of nahmii to build the future of financial services.