Sberbank, a major state-owned bank in Russia, has joined the Enterprise Ethereum Alliance (EEA), to test the applicability of the Ethereum blockchain network on existing banking infrastructures and systems.

Earlier this week, 48 new members including HP and Japanese telecom KDDI have joined the EEA, the Ethereum blockchain consortium led by the Ethereum Foundation. Today, the EEA houses some of the largest conglomerates in the finance and technology sectors, such as Intel, JPMorgan, Santander, and Microsoft.

Sberbank’s Vision in Ethereum Integration

Since the beginning of 2017, many major financial institutions in Russia have started to consider the integration of Ethereum to automate operations which otherwise require significant manual labor and verification.

In February, Sberbank CEO Herman Gref revealed that the bank expects the commercialization of enterprise-grade blockchain networks and platforms within the next two years, by 2019.

"Maybe they are a bit optimistic, but two to two-and-a-half years is the horizon within which we can speak about the application of blockchain commercial operation,” said Gref.

While some banks and financial institutions have already begun the development of permissioned or centralized blockchain networks through independent development teams, major corporations such as JPMorgan have successfully developed and deployed blockchain networks like Quorum as a part of the EEA initiative.

Most recently, JPMorgan’s Quorum blockchain, which was structured after the Ethereum Go client, was adopted by pharmaceutical giants Pfizer and Genentech, two companies with a combined market cap of $300 billion.

Essentially, Sberbank expects to achieve a similar goal in the mid-term, developing enterprise-grade blockchain networks that are applicable with existing IT infrastructures in major industries such as technology and finance. Through the EEA and assistance of experienced developers within the consortium, Sberbank will work towards the vision of its CEO Herman Gref, to commercialize blockchain technologies by 2019.

First Deputy Chairman of Sberbank’s Executive Board Lev Khasis stated:

“Sberbank’s joining the Enterprise Ethereum Alliance is an important stage in achieving the goals on our technology agenda. This membership implies for us access to cutting-edge developments and international expertise in Blockchain technology.”

Practical Use Cases of Enterprise-Grade Blockchains

While the term enterprise-grade blockchain still remains ambiguous, for large-scale conglomerates to adopt and integrate blockchain technology, blockchain developers must provide an infrastructure that is capable of processing thousands of million points every second, which is a challenging task given that public blockchain networks are struggling to deal with three to six transactions per second.

As Vitalik Buterin previously stated:

“Bitcoin is currently processing a bit less than three transactions per second and if it goes close to four, it is already at peak capacity. Ethereum has been doing five per second and if it goes above six, then it is also at peak capacity. On the other hand, Uber on average does 12 rides per second, PayPal several hundred, Visa several thousand, major stock exchanges tens of thousands, and in IoT, you’re talking hundreds of thousands per second.”

Hence, the goal of banks like Sberbank should be to minimize the tradeoff between security and flexibility, and to maximize decentralization in permissioned blockchain networks.