Distributed ledger startup Cobalt believes its technology can have wider applications than it was originally designed for.
Set up to provide a platform for foreign exchange transactions, the startup is now spinning off part of its technology stack in a bid to make its immutable, shared database system more widely accessible to companies looking to innovate with blockchain.
The wholly-owned subsidiary – code-named “Babylon” – will provide what Cobalt co-founder Adrian Patten calls an “immutability server” designed to log as many as 30 million transactions per second into any number of public or private blockchains. While the server itself doesn’t conduct transactions, it uses a one-way algorithm to verify the accuracy of payment instructions before a transaction is completed.
Speaking with CoinDesk at Cobalt’s London offices, Patten compared the Babylon technology to a decentralized Fort Knox, stating:
“The gold is there. People know how much is in there. We don’t have to count it every single time we do something, we just need to know it hasn’t moved. It’s really simple.”
As a result of such simplicity, Patten believes he’ll be able to provide services similar to centralized solutions, but for less than 1 cent per transaction. Further, he sees such an offering as useful in ways that exceed Cobalt’s original requirements, positioning the spin-off as a way to pursue those ventures without distractions.
For example, while Babylon’s first client will be Cobalt itself, the spin-off has already begun to explore use cases with clients outside its parent firm’s target area by looking to log geolocation data for self-driving cars.
In interview, Patten highlighted potentially competing progress being made by such centralized transaction messaging platforms as an example of how moving existing systems to a distributed ledger could bring about more efficiencies in legacy systems.
But he also argued that it will be cheaper and easier for startups like his own to build platforms from the ground up than to migrate decades-old financial infrastructures to a blockchain.
Specifically, he said that the private networks favored by many regulated companies are “mathematically less secure” than public blockchains, and Babylon is designed to capture the best of both paradigms.
“It seems to me that some of the providers out there are trying to make distributed ledger technology in the same image of existing legacy infrastructure, with commercial databases and sitting behind firewalls,” Patten said, adding:
“I would argue that the reason bitcoin and ethereum are successful is because it’s not like that.”
Beyond just a faster, more transparent messaging platform, though, Babylon is being positioned as a more secure alternative to traditional services.
While legacy institutions worry about the security of public blockchains with unknown actors, Patten argues that private blockchains alone can’t be as secure or resistant to collusion as public alternatives.
To address those concerns, Babylon hashes transactions both on its own distributed ledger and to the public ethereum blockchain. In the future, that data could also be hashed to the bitcoin blockchain or any number of permissioned distributed ledgers, according to Patten.
In theory, such a ledger could be used to verify transaction messages before they complete, making more difficult the kinds of hacks where infiltrators take on the identities of network participants.
“The more ledgers you hash to, the more mathematical certainty that it hasn’t been altered, because you have to hack two networks.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Cobalt.
Ishtar Gate, Babylon image via Shutterstock