Japanese Banks to Test Stablecoins on High Speed Blockchain – How Does it Work?
Banks in Japan are beginning a trial to issue fully compliant stablecoins on a super-fast but largely centralized blockchain known as the Japan Open Chain.
The bank trials will be the first experience with stablecoins in Japan that is fully compliant with local laws, a press release sent Thursday said.
For now, the trial involves the three Japanese banks Minna no Bank, Tokyo Kiraboshi Financial Group and Shikoku Bank, with each bank to issue its own stablecoin.
Proof of authority
The blockchain that the banks will use – the Japan Open Chain – is being developed by local company GU Technologies. The chain can process 1,000 transactions per second and uses a consensus algorithm called Proof of Authority (PoA) instead of the more popular Proof-of-Work (PoW) or Proof-of-Stake (PoS).
As is often the case, however, higher transaction speeds come at the expense of decentralization.
According to its website, the Japan Open Chain has only six network validators, compared to tens of thousands of node operators on the Bitcoin network for example. Over time, Japan Open Chain aims to increase the number of validators to 21 companies, its website says.
Fully compatible with Ethereum
Japan Open Chain is fully compatible with Ethereum, which has the world’s largest ecosystem for decentralized applications, the press release explains.
He added that this also makes the chain compatible with the popular Ethereum wallet MetaMask, making it readily available to a large number of regular crypto users.
The issuance of stablecoins on the Japan Open Chain will be a “great business opportunity” for Japanese financial institutions, potentially allowing them to process transactions made around the world, the press release concluded.