Blockchain revolution and cryptocurrencies
Professor Alex Biryukov and Dr. Dmitry Khovratovich, Computer Science and Communications Research Unit
Why is blockchain a key enabler for FinTech in the future?
First, it is based on a distributed ledger, sustained not by an institution itself but by its customers, which removes a lot of administrative burden. Another property (known from the famous Bitcoin example) is that it makes the fund transfer between users from different countries much faster and more efficient. Furthermore, the network that is organized among the users can be completely trusted, so it facilitates the set up of accounts. For the users themselves, the entry costs are much lower than with traditional banking. The opening of an account is completely automatic, it doesn’t involve any human interaction and there is no loss of security. Of course some protective measures (i.e. anti-fraud) must be taken but in general it is much easier. Additionally, you don’t have to employ a number of people just for doing the accounting. As the blockchain technology is still evolving, it is possible to adapt the specific risk management or security policies to the specific needs of an organisation.
Can you give a few examples of your research by your lab related to blockchain and bitcoin?
Our lab is well known for its anonymity research on Bitcoin. We have shown that contrary to the popular belief, the anonymity in the Bitcoin network is much more limited. We think that every institution willing to run a blockchain project need to know how much privacy it delivers. We thus provide a deanonymization toolkit that enables such assessment.
We have been working a lot in R&D on cryptocurrency mechanisms and solved a number of well-known problems. You might hear that in Bitcoin a lot of money minting takes place in “mining rigs”, where people just spend huge amounts of electricity. We have shown some techniques that eliminate such an approach and thereby attract ordinary money holders to sustain the ledger.
Recently we have developed a concept of micropayments which can be very helpful in the organization of certain web services. It works like a complementary currency but with more granularity and is better tuneable.
Using cryptocurrency technologies, we have developed a new scheme for password hashing, called Argon2, which is to become a new industry standard in password processing and password-based key derivation (ref. https://password-hashing. net/). What type of R&D projects do you develop with your partners? When it comes to building a new tech solution or to investigate how blockchain can make a business more profitable, we perform a full-cycle project in complete interaction with the partner, after a thorough analysis of his needs. A complete R&D project, from research to the actual implementation (proof of concept etc.) would typically span for 3-4 years.
What type of partners could approach you for a partnership project?
The type of partners that could approach us are banks, investment funds, insurance companies with the strategic goal to explore blockchain as part of a larger assessment of fintech opportunities based on forward looking business cases. As there are many start-ups in the digital currency space we are currently considering shortterm projects from 2 weeks to 6 months. In this case, we would provide an evaluation or recommendation on an ongoing project without being directly involved in it. For instance, someone might have started a blockchain project and want an external independent opinion. We could equally evaluate the consistency of the security features of this specific project.
FinTech Gazette / January 2016