@amit This is an intriguing practical application of blockchain and cryptography in solving real life problems. Thanks for this wonderful research.
I recall that in @Tony_Siu’s Summary on “Do You Need a Blockchain?”, he distilled three criteria laid out by the researchers on when to use blockchain technology for solving a problem.
This research by @amit validates the criteria and provides some hints on @jmcgirk’s question on when not to use blockchain. This is how this paper follows the criteria:
1.The first criterion was that there has to be multiple parties involved for blockchain to be used in solving a problem. In this case, there were multiple local banks involved in solving the netting problem.
2.The parties should not mutually trust each other. The local banks, in this case, did not mutually trust each other.
3.The parties do not want the services of a trusted third party due to trust issues. In this case, due to trust issues, the local banks did not want the mediation of the central bank in solving this problem.
For further practical insights on the application of blockchain to solving the netting problem, I will reference a practical solution of netting using blockchain by IBM. Although this case is not exactly like the one in the paper, it provides a reasonable insight on how blockchain is already solving the netting problem in the financial sector.
@amit In Addition, I have a few questions:
1.Apart from the low-cost and better-speed advantages of Zero Knowledge Proof, are there other reasons for which it was chosen over Secure Multiparty Computation for local checks? Could there have been security or privacy reasons, or some other considerations?
2.What is special about the Karmarkar Linear Programming that gives it a high percentage settlement over the Naive and FIFO algorithms for the optimization process?
3.For further research, I have an idea. From the present research, there were two methods suggested for solving this netting problem, the Optimistic Phase and the Fallback Phase. The Optimistic Phase is to be applied when all parties are honest, while the Fallback Phase is to be employed when some parties are dishonest. In a situation where all parties are dishonest, what would be the possible method of solving the netting problem?
If no answer comes to mind, I suggest that the option could be considered for further research.
References
Dickson, A. (2020) Streamlining Financial Netting with Blockchain. IBM Supply Chain and Blockchain Blog[online]. Available at: https://www.ibm.com/blogs/blockchain/2020/12/streamlining-financial-netting-with-blockchain/ [Accessed 2nd August 2022].