The South African Reserve Bank Just Proved Ethereum Can Process a Day’s Worth of Interbank Payments – In Less Than Two Hours

JOHANNESBURG, SA— Quorum, the enterprise version of Ethereum was launched through the Enterprise Ethereum Alliance in March 2017. Since then, there has been significant interest around the world to find out whether it is sufficiently scalable, resilient and confidential to be used for interbank payments.

Project Khokha, at a live launch event on June 5th, successfully proved that a new wholesale payment system built on Quorum could process the typical daily volume of payments  — with full confidentiality and finality  — in two hours.

This test created a geographically distributed ledger between participating banks for a domestic payment system, backed by a tokenized South African Rand (ZAR), to allow participating banks to pledge, redeem, pay, and track balances, without a centralized central bank system (i.e. single point of failure). In other words, instead of requiring the South African Reserve Bank to check and approve all transactions, the banks themselves approved transactions on the network, yet kept transaction details that do not involve them confidential.

Transactions sent by geographically distributed nodes running on various hardwares were processed within two seconds. The distributed consensus mechanisms also provided the requisite resilience. This is also thought to be the first time a Central Bank Settlement proof of concept (PoC) has used new models for consensus and confidentiality on a Quorum network while delivering the required transaction performance.

The South African Reserve Bank (SARB) initiated Project Khokha in the latter part of 2017 with it’s technical partner, ConsenSys. The participating consortium of banks included SARB, ABSA, Capitec, Discovery, Investec, FirstRand, Nedbank, and Standard Bank.

There were over 400 people at the project launch including executives from all the major commercial banks. After the event Peter Munnings of ConsenSys and Adharacommented, “This was a very practical test of our Enterprise Ethereum solution for tokenizing fiat cash, and enabling payments. We are proving it can deliver both the required transaction per second performance and levels of confidentially over a diverse hardware network. This is a significant step forward for Ethereum and Quorum.”

The consensus mechanism used the Istanbul Byzantine Fault Tolerance (IBFT) to ensure settlement finality. Pedersen commitments were used for balance updates to provide full confidentiality. Through the use of these innovative approaches, the platform achieved high levels of throughput, while retaining transaction privacy.

The main success metrics that Project Khokha achieved:

• Transaction Performance: Tested to current stress load level achieving the target of 70,000 transactions over a two hour period. The actual test ran in one hour fifteen minutes.
• Network Performance: Block Propagation Times achieved to demonstrate a performant network. 95% prorogation in <1 second and 99% propagation in <2 seconds.
• Confidentially: Maintain required level of confidentiality with required performance level. Delivered confidentially of commercial bank transactions including private data of payment sender/receiver and full view required for central bank to perform oversight function without the central bank needing to run a centralized system to do so.

Project Khokha also demonstrated that the network could work effectively across diverse bank hardware (on-premise, on-premise virtual machine, and cloud), in a regulated environment.

ConsenSys’ team that executed the technical implementations of this project are a part of a new venture, Adhara. Adhara is an international payments, clearing, and settlement platform. Edward Budd, Adhara co-founder, commented, “We are excited to continue developing the components tested with Project Khokha, and also further combine them with International Payments, Liquidity/Funding Management to create the full Adhara product suite.”

While there are still education and knowledge sharing needed to enable this Proof of Concept to be fully adopted by regulators and the banking industry, it is an important lesson in the benefits of cross-industry collaboration.

JOHANNESBURG, SA— Quorum, the enterprise version of Ethereum was launched through the Enterprise Ethereum Alliance in March 2017. Since then, there has been significant interest around the world to find out whether it is sufficiently scalable, resilient and confidential to be used for interbank payments.

Project Khokha, at a live launch event on June 5th, successfully proved that a new wholesale payment system built on Quorum could process the typical daily volume of payments  — with full confidentiality and finality  — in two hours.

This test created a geographically distributed ledger between participating banks for a domestic payment system, backed by a tokenized South African Rand (ZAR), to allow participating banks to pledge, redeem, pay, and track balances, without a centralized central bank system (i.e. single point of failure). In other words, instead of requiring the South African Reserve Bank to check and approve all transactions, the banks themselves approved transactions on the network, yet kept transaction details that do not involve them confidential.

Transactions sent by geographically distributed nodes running on various hardwares were processed within two seconds. The distributed consensus mechanisms also provided the requisite resilience. This is also thought to be the first time a Central Bank Settlement proof of concept (PoC) has used new models for consensus and confidentiality on a Quorum network while delivering the required transaction performance.

The South African Reserve Bank (SARB) initiated Project Khokha in the latter part of 2017 with it’s technical partner, ConsenSys. The participating consortium of banks included SARB, ABSA, Capitec, Discovery, Investec, FirstRand, Nedbank, and Standard Bank.

There were over 400 people at the project launch including executives from all the major commercial banks. After the event Peter Munnings of ConsenSys and Adharacommented, “This was a very practical test of our Enterprise Ethereum solution for tokenizing fiat cash, and enabling payments. We are proving it can deliver both the required transaction per second performance and levels of confidentially over a diverse hardware network. This is a significant step forward for Ethereum and Quorum.”

The consensus mechanism used the Istanbul Byzantine Fault Tolerance (IBFT) to ensure settlement finality. Pedersen commitments were used for balance updates to provide full confidentiality. Through the use of these innovative approaches, the platform achieved high levels of throughput, while retaining transaction privacy.

The main success metrics that Project Khokha achieved:

• Transaction Performance: Tested to current stress load level achieving the target of 70,000 transactions over a two hour period. The actual test ran in one hour fifteen minutes.
• Network Performance: Block Propagation Times achieved to demonstrate a performant network. 95% prorogation in <1 second and 99% propagation in <2 seconds.
• Confidentially: Maintain required level of confidentiality with required performance level. Delivered confidentially of commercial bank transactions including private data of payment sender/receiver and full view required for central bank to perform oversight function without the central bank needing to run a centralized system to do so.

Project Khokha also demonstrated that the network could work effectively across diverse bank hardware (on-premise, on-premise virtual machine, and cloud), in a regulated environment.

ConsenSys’ team that executed the technical implementations of this project are a part of a new venture, Adhara. Adhara is an international payments, clearing, and settlement platform. Edward Budd, Adhara co-founder, commented, “We are excited to continue developing the components tested with Project Khokha, and also further combine them with International Payments, Liquidity/Funding Management to create the full Adhara product suite.”

While there are still education and knowledge sharing needed to enable this Proof of Concept to be fully adopted by regulators and the banking industry, it is an important lesson in the benefits of cross-industry collaboration.