Payments Giant Qiwi is Building a Blockchain Replacement for its Core Database

Russian payments firm Qiwi is currently designing its own proprietary blockchain system in an effort to replace its central payments database.

AccessTimeIconMay 20, 2016 at 3:34 p.m. UTC
Updated Mar 6, 2023 at 3:26 p.m. UTC

Russian payments firm Qiwi is currently designing its own proprietary blockchain in an effort to replace its central payments processing database.

Called the "Qiwi blockchain system", the company’s development effort focuses on how its core database of customer transactions could be reimagined to reduce costs.

Qiwi is one of the largest payment service providers in the Commonwealth of Independent States (CIS) region, with more than 16.1 million digital wallet users and 62 million transacting customers per month.

Today, according to the company, all customer transactions are processed through a "database with two tables" that logs all customer transactions and keeps the balances of each account. Qiwi hopes to reimagine this process so that users would sign traditional transactions in the back end with a private key that they would use to control their account, and that would speak to and update and update its central ledger.

In interview, Qiwi communications director Konstantin Koltsov explained the impetus for the test and how the company hopes it will improve its operations.

Koltsov told CoinDesk:

"[When] you have centralized processing, you have to pay more for security, to protect it, to maintain it physically, [to ensure] proper maintenance. You have costs to maintain all the technical infrastructure. We are testing the system to see if it may see a cost reduction for this initiative."

Alexey Troshichev, blockchain processing architect at QIWI, explained that this system seeks the same efficiencies as the bitcoin blockchain, where miners receive transactions, and once proof of work is completed, seal these transactions into a block.

"We will collect transactions like the miners do, and once we [validate the transactions], we will produce or release this transaction with a block into the world. As a result the people will see, the users of the system will be public and proved," he said.

Troshichev said Qiwi is working to build a custom blockchain system to meet this need given what it sees as the inadequacies of existing private and public blockchains.

"We see bitcoin and Ethereum as workshops or labs, which perform continued ideas checking, so we can choose elements which will suit our needs. The private blockchain systems we have reviewed either have the same architecture drawbacks as the public systems or lack [key] operating features," he continued.

For now, Qiwi disclosed that the system is undergoing "internal testing" but that it could seek to launch the blockchain service in parallel with its current processing system should it pass initial evaluations.

Transparent services

In addition to simply cutting costs, Qiwi sees the service as one that could provide its system with some of the transparency afforded by the bitcoin blockchain.

Troshichev explained that, with a blockchain back-end system, consumer and merchant customers would be able to trust that their transactions are immutable and that all transactions could be verified independently.

"We are creating a system which will receive requests to process transactions and produces a blockchain, which will allow anyone to check reliability of the transactions," he said.

Troshichev is optimistic that the benefits of transparency and accountability could increase end-user satisfaction with Qiwi’s services, thereby driving more user acquisition.

"The problem with bitcoin, you will find, if you meet someone on the street [and show how bitcoin works], the person will not be impressed, if [he or she] compares it to the convenience with a card transaction," he said.

However, he stressed that he believes it is these back-end benefits, not the front-end benefits of owning and managing those funds as bitcoin users do by maintaining their respective digital assets, will eventually encourage more users to the service.

"There are merchants interested in this kind of a system, and if you have the big merchants, in the this ecosystem, you will have great user acquisition, and once you have a user acquisition, you get more value," he said.

Square one

But, Qiwi’s blockchain system, while having some of the transparency features of a public blockchain system, is envisioned as a private ledger.

Under the design, Qiwi would control all the nodes that process transactions, but in doing so, the company hopes to achieve a greater scalability for the system.

Qiwi’s goal is to be able to process transactions “in milliseconds”, and that millions of the transactions made by its users could be processed each day.

"Unfortunately we cannot use neither one of public blockchain systems for our tasks," Troshichev said.

Troshichev went on to say that the system aims to use torrents in the same as distributed content delivery networks, as part of an effort to reduce the time that would be needed for new users to download a full copy of the Qiwi blockchain.

"It’s not a comfortable part of the protocol, you have to just download slowly a huge amount of the data. People will use the torrent to distribute between nodes," he said.

Qiwi also intends to use an API that would help it manage spikes in the number of transactions the network would need to process, allowing it to better disperse data, though he said this part of the system would also remain closed.

"This piece of the system is not open. We need to have the full control here, we need it for predictable time of operations," he said.

Blockchain vision

The project is the latest, and perhaps most ambitious, for the Russian payments giant, which has been investigating applications of digital currencies and blockchain tech since mid-2015.

It was then that the company first unveiled its "BitRuble" project. Aimed at replicating traditional fiat currencies using a blockchain, Qiwi has since indicated it will continue similar research, announcing last month it was seeking to lead a regional blockchain consortium.

Troshichev indicated that the project is part of a larger goal to build an “ecosystem” for blockchain technology that can improve some of Qiwi’s core services.

A key difference between Qiwi and major banks experimenting with the technology, Troshichev argued, is that it will have retail users who will be more interested in new types of services that provide benefits, and less susceptible to regulatory risk.

While the question of regulation still looms in Russia, Troshichev said that discussions are now being had, and that key members of the government are beginning to be educated on why digital currency and blockchain technology are symbiotic in nature.

Still, he indicated that delivering benefits to consumers was key to this broader educational process.

Troshichev concluded:

"Our vision is to get the value to the retail user, to add this value."

Qiwi image via Facebook


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