Thursday, June 1, 2017 Stamford, CT USA — In a move that might seem surprising in an era of data breaches and hacking scandals, many of the companies working to bring the blockchain to global financial markets have decided to release the code to their technology as open-source software.

A new report from Greenwich Associates, Addressing the Latest Trends in Distributed Ledger Technologies, reveals broad support for an open-source approach among the companies and consortia working to apply blockchain or distributed ledger technologies (DLT) to financial markets. 

The report presents the results of a March 2017 Greenwich Associates study of 402 global market participants working on blockchain, including banks, brokers, technology companies, exchanges, and others. Fifty-two percent of these participants see open-source as the best model for distributed ledger technologies. Among technologists, support is even stronger, at 61%. 

“The goal of many of these new technology companies is to  replace the existing global financial market infrastructure with distributed ledger technology,” says Richard Johnson, Vice President of Market Structure and Technology at Greenwich Associates and author of the new report. “This is a monumental task and as such, support for open-source technology reflects an understanding that transitioning to this new technology can only be achieved by having the widest possible community of developers working on the codebase.”

Open-Source Risks
The industry’s support for open source blockchain technology is not without recognition of the potential risks. Forty-six percent of study participants were concerned about damaging bugs being introduced into the system and 47% cited the risk of systems being hacked through vulnerabilities inserted into code. 

The industry is working to resolve these and other security issues. Fifty-eight percent of study participants see hardware security modules (HSM) that provide strong authentication and encryption as an important element in addressing security concerns related to DLT. HSMs are already in use in retail banking and in payment transactions, such as those processed through the SWIFT network. Fifty-three percent see multi-signature technology a valuable tool for adding security to DLT solutions. 

Finally, a large majority of study participants (81%) see permissioned blockchains are inherently more secure than public blockchains. “In the end,” concludes Richard Johnson, “a blockchain-enabled financial market will likely consist of a core plumbing of market infrastructure developed by the open-source community, operating beneath proprietary applications that provide a higher level of security.”