The Bank of Canada (BoC) has published an investigation on the “incentive compatibility” of blockchain innovation this week, finding that double spending is an “unrealistic” result.
The new BoC investigation centers around a proof-of-work (PoW) protocol for blockchain innovation, demonstrating the practices of an “honest miner” and a “dishonest miner.”
The researchers at the Canadian bank’s displayed a system to check whether a digital ledger like blockchain was used to all sorts of “cheating” for example, spending twice as much when clients change records in the ledger for their own benefit.
The examination composes that the primary development of a digital ledger technology like blockchain is to make the clients in the system in charge of the guarding of the system itself. For blockchain innovation, the system affirms new transactions when an update is settled upon by all clients in the system.
The investigation finds that if one miner controls the greater part of the majority of the computational power, the miner would theoretically have the capacity to arrange a “51% attach” where
“Confirmation lags, in theory, lose their power in controlling double-spending incentives. The dishonest miner creates an arrival rate that is larger than those of the other honest miners combined […] and, thus, can always cheat by double spending.”
Nonetheless, the examination notes that with for this to occur from a financial viewpoint, a “dishonest miner” must have “deep pockets” and be “risk neutral,” concluding,
“These assumptions tend to be unrealistic and, in practice, users have little economic incentives to launch such an attack, especially when the computational investment by other miners is large.”
James Chapman, senior research executive at the BoC’s assets management and banking sector, had already questioned the viability and security of utilizing blockchain tech for banking.
Another investigation led by major global management consulting firm Bain & Company found that the usage of distributed ledger tech like blockchain “has the potential to revolutionize transaction banking.”