This article was first published on: Insights – Ripple --

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In my previous post on the hype around blockchain, I acknowledged the technology’s potential but warned that many of the much-touted benefits were still a long way off becoming a reality. Instead I urged banks to focus on four key areas—trade finance, on-demand liquidity, capital requirements and payments risk—where they could use blockchain to make short-term gains while laying the groundwork for a long-term strategy.

Yet even within this quadrant of opportunity, the very nature of Bitcoin’s blockchain technology imposes critical restrictions on its effectiveness in a banking environment.

1.   Throughput

Blockchain refers to a single-state database that disseminates the same information concurrently to all connected parties. Like any database, the processing power of a blockchain is based on how fast it can move data around. Right now, the Bitcoin blockchain technology is unable to process transactions at speeds required by banks. At most, Bitcoin can handle seven...

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