Eleven member banks of the R3 consortium, a collaborative group
of the world's largest and most influential banks and financial
institutions, including Barclays, BMO Financial Group, Credit
Suisse, Commonwealth Bank of Australia, HSBC, Natixis, Royal Bank
of Scotland, TD Bank, UBS, UniCredit and Wells Fargo have connected
on the centralized Ethereum-based blockchain network.
During the pilot test, banks connected to the R3 blockchain
network used the peer-to-peer technology to process and settle
international transactions within the network.
"As we progress our evaluations of shared ledgers and smart
contracts, we look forward to leveraging R3's lab environment for
collaborative technology experiments. Ethereum is a well-known open
source technology in this space and we also look forward to
collaborative experiments using other technologies,"
stated Barclays Investment Bank CTO Brad Novak.
Unlike Bitcoin however, the unique blockchain network of R3
offers tokenized assets as the unified store of value, enabling
banks to implement its existing fiat-based banking processes onto
Using the Ethereum technology, banks will also attempt to
process the transfer of assets and shares without cost across the
banking systems of the connected banks.
"The transition from vision and hypothesis to application and
execution signifies the next major step towards using this
technology to transform how institutions interact, report and trade
with each other in financial markets," Novak said.
"This is a very exciting development, both for R3 and our member
banks, as well as the global financial services industry as a
said R3 CEO David Rutter.
One key limitation of the R3 blockchain network is its
centralization. The R3 consortium states that the blockchain they
have built and are operating is private among banking groups and
The concept of a blockchain network, introduced by Satoshi
Nakamoto in 2008, describes a peer-to-peer technological protocol
in which users can transact or settle assets to each other, in a
trustless environment. However, because the blockchain technology
of R3 consortium depends on the technical rules and regulations set
by a central authority, the technology of R3 does not qualify as a
trustless technology, like the Bitcoin network.
Thus, the development of the R3 blockchain technology defies the
concept of a blockchain technology introduced in the Bitcoin white
paper drafted by Nakamoto eight years ago.
Additionally, the security of a blockchain network depends on
the computing power that is being contributed to secure and confirm
transactions. The Bitcoin network for example, is considered to be
an unbreakable technology because of the magnitude of computing
power provided by millions of miners and leading mining firms
Since the R3 blockchain network is maintained by its member
banks, the "permissioned" blockchain technology of the consortium
has substantially lower security levels and consumer benefit.
Despite the limitations of the technology, R3 CEO Rutter still
believes that its bank-based blockchain network could benefit
global financial markets and reduce the costs of banks
"The addition of this new group of banks demonstrates widespread
support for innovative distributed ledger solutions across the
global financial services community, and we're delighted to have
them on board,"
. "We have placed an emphasis on working with the market from day
one, and our partners recognize that a collaborative model is the
best way to quickly, efficiently and cost-effectively deliver these
new technologies to global financial markets."
Currently, only 11 banks have joined the network designed by the
R3 consortium. Over the next few months, more financial
institutions in the consortium could potentially embrace the
technology and integrate it to their existing financial
Interestingly, the growing usage of the Ethereum network in the
development of permissioned blockchains led by the world's largest
financial establishments and multi-billion dollar banks has surged
the value of the Ethereum network and its cryptocurrency Ether,
which is now worth USD $715 million, nearly 11.1 percent of the
The demand for Ethereum has also explosively increased on
cryptocurrency trading platforms such as ShapeShift and Poloniex.
The founder and CEO of ShapeShift, Erik Voorhees, hinted that the
company may provide a customized service and platform for Ethereum
traders, due to the unexpected spike in the cryptocurrency.
"We'll continue working to make it as easy as possible for all
blockchain assets to be convertible with Ethereum, via web or API.
We're working on improving contract support, and look forward to
some more advanced Ethereum functionality,"
said Erik Voorhees.