Sberbank, Russia’s largest lender, is to scale down its participation in Masterchain, a blockchain project led by the country’s central bank, calling it “ineffiecient, insecure and slow”.
Oleg Abdrashitov, head of Sberbank’s blockchain lab, told Coindesk the institution was winding down its participation in Masterchain and would seek opportunities using more widely-proven enterprize blockchain platforms.
Coindesk reported Abdrashitov as saying:
Masterchain does not satisfy the requirements for Sberbank’s use cases, so for all future exploration we will use enterprise blockchain platforms such as Hyperledger Fabric or Quorum.
Mortgage Bond Custody
By March 2017, Sberbank was in control of around half of Russia’s mortgage market reported Vedomosti, the press-service of the state-backed institution.
Indeed, the primary use case Sberbank intended for the enterprize platform was as a decentralized depository for digital mortgage bonds.
Such a use case could potentially save Sberbank millions of dollars a year by cutting out the National Settlement Depository, a Moscow-based exchange group and clearing facility that charges a small fee per mortgage bond it holds as custodian.
Masterchain Launch Delayed
The Masterchain trial use case started last autumn and was set to be deployed in August, but this launch date has been delayed as technical developments have slowed.
Masterchain was conceived from a fork in the Ethereum blockchain, and built according to laws regulating the use of cryptography, which is highly restricted in Russia. This means the system is highly centralized.
Abrashitov also told Coindesk the system was too “slow and insecure”, with a single mortgage bond taking three minutes to upload onto the Masterchain.
He said: “Business people are not used to dealing with something where you push a button and then you go take a break [until it works]. The leadership is looking at that and gets disappointed in the blockchain tech. We are spending shareholders’ money [on blockchain exploration]. We need solutions that are practical.
Abdrashitov also explained that the Masterchain blockchain was inefficient, making it impossible to use the platform for several purposes at the same time. So for every use case a new network would have to be built.
Further Options Considered
And so, the state-controlled bank said it was backing out gently. While it will continue to participate in the project, its role and expected usage of any end product will be limited and the company intends to seek alternative enterprize platforms, naming the likes of Hyperledger Fabric and Quorum.
Hyperledger Fabric was developed by Linux and IBM for the execution of smart contracts and meets the use cases required by Sberbank for functions such as over-the-counter trading, trade finance and mortgage lending.
