Coinprism, the colored coin startup that created the Open Assets protocol as experimented with by NASDAQ and Overstock, has announced Openchain.
Openchain is an open-source distributed permissioned ledger with optional “anchors” into the Bitcoin blockchain. It is designed to solve Bitcoin's scalability and compliance issues as encountered by financial institutions, while still enabling several of the use cases offered by the Bitcoin blockchain.
While Bitcoin's blockchain currently offers a trustless public ledger, and is secured by a record amount of hashing power, existing financial institutions are often unable to make use of these properties. Most importantly, Bitcoin has proved to be a challange from a regulatory perspective, as regulators often require financial institutions to offer a level of accountability that Bitcoin cannot give them.
“Public ledgers like Bitcoin have been problematic for financial institutions as transaction validation is delegated to a group of potentially unknown parties – the miners – while financial institutions are often legally required to vet every transaction going through them,” Coinprism founder and CEO Flavien Charlon said in a statement. “Openchain has been designed with these requirements in mind, and offers full control on transaction validation.”
Openchain allows each company or institution to deploy its own version of Openchain, for internal use. Within these companies or institutions, each level of the organization can transact on the corresponding level of their Openchain, using their unique digital signatures.
As such, higher levels within the organization have access to higher levels of the ledger, and are able to set permissions for lower levels. These lower levels, in turn, have access only to the lower levels of the ledger.
This, in effect, replicates the existing structure of an organization onto a blockchain-like system, while incorporating some of the advantages of blockchain technology such as transparency and auditability.
Additionally, Openchain allows different organizations to transact conceptually similar to how financial institutions currently conduct business. Essentially, several companies or institutions can set up mutual gateways through an API, connecting their Openchain ledgers.
This allows these organizations to create an account on the other Openchain, acting as a mutual liability. Once a transaction is validated by both parties, the accounts on both Openchain ledgers are adjusted simultaneously.
“Openchain features a powerful hierarchical account system, a hybrid between a file system and a double-entry accounting system,” Charlon said. “This lets the administrator of an Openchain instance define their business rules, such as anti-money laundering and know your customer regulation, by setting various permissions on accounts, with different levels of granularity.”
Because the distributed permissioned ledger uses a simplified and trust-based consensus mechanism, it exceeds Bitcoin's capabilities on a technical level. While Bitcoin is currently limited to a handful of transactions per second, Openchain offers several orders of magnitude more transactions than that. On top of that, Openchain's transaction validation is virtually instant.
Meanwhile, Openchain offers immutability by publishing “anchors” into the main Bitcoin blockchain at regular intervals. It can then benefit from the security and irreversibility of Bitcoin while keeping transaction costs to a minimum.
“While proof of work is central to building a fully autonomous, decentralized currency such as Bitcoin, it actually becomes a burden when you start tokenizing assets,” Charlon explained. “With Openchain, we have taken all the key characteristics of a Blockchain like immutability, auditability and programmability, but removed the legacy of proof of work. This allowed us to build an extremely efficient and scalable platform with no compromise.”
Openchain open source and is now available on GitHub. Coinprism offers a test wallet at wallet.openchain.org for developers and curious users to start experimenting with it.