Several U.S. banks and global financial institutions have dipped their toes into the blockchain world this year by implementing systems on permissioned ledgers that only invited members can join. Now, one of Poland’s 10 largest banks is taking it a step further.
Warsaw-based Alior announced that it is beginning to offer a feature that will allow customers to check on the authentication and integrity of official documents they receive using the public ethereum blockchain that supports the ether cryptocurrency valued at more than $27 billion. While financial institutions have been historically more open to working with permissioned, private blockchains that they have more control over, this use of a public blockchain is among the very first.
“Our mission is to be disruptive, so we want to provide innovative solutions, and we want other banks to follow us as well. We welcome if somebody copied our solution,” says blockchain strategy lead Tomasz Sienicki. “We are showing that it’s possible to use public blockchain even if some people think it’s impossible.”
The reason for the unusual position is that Poland has regulations that require banks to provide customers access to documents in the form of a durable medium, and its Office of Competition and Consumer Protection ruled in 2017 that a page on a bank’s website which can be easily changed doesn’t qualify.
That interpretation pushed Alior to explore new solutions to serve customers, and it established what it calls the Blockchain Center of Excellence last October to complete the project. Sienicki, who worked at the bank as a trader since its inception in 2008 before transitioning to lead the blockchain team, said the blockchain-based system complies with all federal regulations.
“It was born in our innovation lab, but later on, we managed to convince our management that a dedicated team should be set up on just blockchain issues,” Sienicki says. “Everybody can copy this code and use it for his or her purposes. We encourage people to do so.”
Signature Bank in the U.S. launched its Signet system in December and JPMorgan, America’s largest bank, followed suit a couple months later by creating the similar JPM Coin. Both are blockchain-based features to enable real-time payments between institutional clients, but they run on a private ethereum blockchain that limits access to people with special permission to use it. Alior’s feature is different in that anybody can join the network, making it more transparent.
“We want people to verify that we did everything right and we don’t conceal anything. If we say the documents are actually verified and authentic, everybody can check it and confirm,” Sienicki says. “That’s not possible using a private blockchain.”
Societe Generale, a major French investment bank, issued a $112 million bond in security tokens on the public ethereum blockchain in April, but Alior’s management believes it is the first bank to use a public blockchain for a direct customer service solution.
The feature uses a smart contract that stores hashes of documents — a digital signature that maps documents to a unique value — and links them with their name and the block number in which they were published on the blockchain. Customers can search documents they have received on Alior’s servers and browse their history to find where those documents are located on the blockchain to ensure that they have not been changed by the bank since they were published.
“We know exactly in which block of ethereum the document with a given hash is published. If we know the block number, we also know the timestamp,” says Piotr Adamczyk, Alior’s blockchain technology lead who was in charge of writing the code for the project. “We know that the document was published some time ago and hasn’t been changed in that time [if the hash stored on the blockchain is identical to the hash calculated from the document], so we can prove it hasn’t been replaced on our servers.”