by Joseph Young
Coinprism, the developer of colored coins ,has officially launched a new open-source distributed ledger technology called Openchain. Coinprism’s colored coins offer an alternative method to track the origin of bitcoins to represent arbitrary digital tokens such as bonds and stocks, and are utilized by established financial institutions including NASDAQ and Overstock.
The primary purpose of Openchain is to solve scalability and compliance issues encountered by companies and financial organizations that attempt to employ Bitcoin’s central and unique distributed ledger to build applications or platforms.
Instead of implementing a blockchain utilized by thousands of platforms worldwide, Openchain enables companies to create and deploy their own blockchain, that can interconnected with other chains developed on Openchain protocol.
Essentially, Openchain provides financial institutions with the ability to create their own centralized transaction settlement system on the blockchain network, by granting full control over transaction validation.
The Bitcoin network for example, is secured by hundreds of thousands of miners who encode a group of transactions into a block which then is connected into a longer chain of blocks. By building a powerful hierarchical account system, however, the Openchain acts as a hybrid between a file system and a double-entry system, allowing an administrator or a financial institution in control of a blockchain launched using the Openchain protocol to define KYC and AML rules through various permissions and different levels of access.
“While proof of work is central to building a fully autonomous, decentralized currency such as Bitcoin, it actually becomes a burden when you start tokenizing assets,” said Flavien Charlon, founder of Coinprism.
“With Openchain, we have taken all the key characteristics of a blockchain, like immutability, auditability and programmability, but removed the legacy of proof of work. This allowed us to build an extremely efficient and scalable platform with no compromise.”
While granting its administrators full control of transactions, Openchain blockchains offer fully transparent and auditable ledgers of transactions for financial institutions and organizations. According to the Coinprism team, auditing and maintaining financial records cost organizations billions of dollars annually. The decentralized and transparent nature of the Openchain blockchain could potentially save financial institutions a lot of money in auditing and compliance.
Furthermore, companies utilizing the Openchain protocol may offer smart contracts in the future, once Coinprism launches a smart contract app store, allowing developers to monetize smart contracts they design.