What’s Inside QIWI’s Blockchain System, and Why Does Russia Need Its Own R3CEV

Opinion
04.05.2016

Speaking at Blockchain and Open Platforms 2016 conference held this April, Alexei Arkhipov, director for crypto-technologies at Russian payments operator QIWI, has announced that the company has implemented and started testing blockchain technology in its operations. He also came up with a proposal a Russian technological consortium in the likeness of R3CEV, so that involved parties could develop and study distributed ledgers. ForkLog talked with Alexei Troshichev, QIWI’s crypto-technology architect, to find out more about the company’s blockchain project.

FL: What is QIWI’s blockchain system like? What issues does it cover? What outcome do you expect?

Alexei Troshichev: We consider the system as a financial processing candidate. So now the basic task is to process transactions and record them on data structure that guarantees immutability and independent audit, or, in other words, blockchain. The biggest result we expect is to achieve horizontal scalability, fail-safety, and low costs.

FL: What technologies did you use in the course of the development? Is it a private or a public blockchain?

Alexei Troshichev: Protocols of modern-day public blockchain systems, like those of bitcoin, Ethereum or NXT, exclude features required by commercial systems, like transactions processing over time periods predictable down to milliseconds, and scalability (capability to process millions of transactions every day). So, none of those systems was appropriate to solve our problems. Closed systems we have considered have in fact the same architectural disadvantages or insufficient operability. So we were basing on our own vision of system architecture.

FL: How will you maintain your blockchain’s security?

Alexei Troshichev: Speaking of any system’s security, we mean three features: confidentiality, integrity/authenticity, and availability. Technically speaking, transparency of data and system fragments (apart from customers’ secret keys) is among the basic features. Will it be full-fledged? That’s more of a legal question. Authenticity and integrity of transactions may be guaranteed at a satisfactory degree, at least over the course of next few years, with existing tools of asymmetric cryptography and cryptographic hash functions, both popular and provided in government standards. As for guaranteeing the integrity of blocks, there’s no comparable alternative to hashcash mechanism (which underlies PoW). Therefore, our working concept is to use computational resources of existing public blockchain systems. However, as neither predicting, nor guaranteeing the required security level is impossible for existing blockchain systems in the long run, we consider creating mining systems involving MEMORY-HARD approach to hashing. In classic public blockchains, PoW is also used to reach consensus under so-called ‘Byzantine problem’. However, as PoW and other consensus algorithms are unacceptably slow, we use a different approach. Availability is a weak link of public blockchains. Relatively small investments in DDoS attacks may hinder transaction processing for hours or even days. A commercial system, which guarantees processing quality, cannot accept that. Our solution is a DDoS-resistant online API.

FL: What problems do you see on the way? How much will it cost? What’s the project’s current state, and how will you be testing it?

Alexei Troshichev: The hardest thing in implementation is to overcome legacy. The cost may be known only post factum. Currently, the project is undergoing integration testing.

FL: What’s the purpose of creating Russian R3?

Alexei Troshichev: QIWI’s vision is based on the idea that processing as it has no value to end users. A convenient ecosystem, where the problems solved by processing is inherent but insufficient, is more valuable. Participation of partners engaged in solving other inherent issues will enable us to create an ecosystem with a human face.

FL: In your opinion, who could join the initiative?

Alexei Troshichev: They are creators of successful products for finance, authentication, identification, as well as sellers of goods and services.

Back in September 2015, QIWI announced their plans to create a digital currency of their own. The project dubbed BitRuble received an extended media coverage notwithstanding the ambiguity of possible bitcoin’s banning in Russia. The company, however, believes that BitRuble is not subject to the ban of cryptocurrency. Even though blockchain is growing popular among Russia’s financial companies, QIWI remains one of the most proactive local market players when it comes to distributed technologies.

Interviewed by Toly Kaplan

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