ASX decision to scrap blockchain-based CHESS replacement makes sense
[Updated in March 2023]
Yesterday, the Australian Financial Review reported that the ASX has decided to scrap its CHESS replacement project. It seems that this decision was made after Accenture provided the ASX with an independent report on the status of the project advising that 63% of the software coding for the new system has been built and about 45% needs to be rewritten or amended.
However, the reason why I think that scrapping makes sense is because, here at Motif Markets, we were faced with a similar predicament and also had to decide upon the future of our registry/settlement system.
Our previous Asset Registry was based upon blockchain technology. While it was working well for our customers, we realised that this is the wrong technology for us to go forward with. Its downsides were:
- Transaction speed and scalability
Speed has been an issue for blockchain for a while. While it is not relevant for a small registry, it would be an issue for a CHESS replacement.
- Unnecessary complexity of consensus
Blockchain uses consensus to allow third parties to directly include transactions in the blockchain. This complexity is unnecessary in a registry where only one party is adding transactions.
- Operating costs
More computing resources are required to handle consensus and provide redundancy than with other storage technologies. Also, operators require extra blockchain skilling to configure and manage these resources.
- Specialised development skills
Companies try to limit the skill sets needed across their software development environment to reduce engineering costs. In most environments, the storage technology(s) used are generally known by most developers. However blockchain software development is a specialised skill which is not common and domain specific. This requires engaging additional development staff. This issue is the primary reason for Motif Markets moving away from blockchain - not just because of it drives up development costs but also be because it makes innovation harder.
So why did we choose this technology in the first place? This can be answered with one word: Marketing. When crypto currency trading was all the rage and investors were seeking companies with crypto capabilities, blockchain seemed a good choice.
In the first half of this year, we decided that these technical downsides were impeding us moving forward and decided to develop a replacement registry product. Development of our new Foundry registry is based upon the same technology stack as used by our other products and is now (March 2023) in production.
The big advantage of this change is that were able to use the knowledge and experience we gained from Asset Registry. Foundry is be a state of the art registry system with a flexible architecture which allows it to be adapted to different use cases. It is easier to maintain and enhance and also a lot cheaper to run.
Making the decision to terminate a project or product which (with hindsight) was mistake can be very difficult. However once the difficult decision has been made and you have commenced down a better path, you generally are glad the decision was made.