The Mystery of the MasterCard Blockchain. What Is It and Does It Do Anything New?

23. October 2017.

MasterCard issued a press release today announcing that it will open up access to its internal blockchain technology via an API published on Mastercard Developers:

“Today Mastercard announced that it will be opening up access to its blockchain technology via its API published on Mastercard Developers. Mastercard’s blockchain solution provides a new way for consumers, businesses and banks to transact and is key to the company’s strategy to provide payment solutions that meet every need of financial institutions and their end-customers. The Mastercard blockchain API will be part of the Money 20/20 hackathon in Las Vegas next week.

The company has tested and validated its blockchain and will initially implement the technology in the business-to-business (B2B) space to address challenges of speed, transparency and costs in cross-border payments. The Mastercard blockchain technology will complement the company’s existing capabilities including virtual cards, Mastercard Send and Vocalink to support all types of cross-border, B2B payment flows – account-based, blockchain-based and card-based.”

It is impossible to determine what value this blockchain delivers that isn’t already available from MasterCard via products that are built on traditional technology. According to the press release the benefits include:

“There are four key differentiators of the Mastercard blockchain – privacy, flexibility, scalability, and most importantly, the reach of the company’s settlement network.

  • Privacy – Mastercard blockchain provides privacy by ensuring that transaction details are shared only amongst the participants of a transaction while maintaining a fully auditable and valid ledger of transactions.
  • Flexibility – Partners can use the blockchain APIs in conjunction with a wider suite of Mastercard APIs to create a range of powerful, new applications. Software development kits are available in six different languages to make the APIs even easier to integrate.
  • Scalability – Mastercard blockchain is designed for commercial processing speed and extensibility by reaching consensus between a trusted network moderator and network participants.
  • Reach – Mastercard blockchain is integrated into the company’s payment network that includes 22,000 financial institutions to move funds that have been committed on the blockchain.

“By combining Mastercard blockchain technology with our settlement network and associated network rules, we have created a solution that is safe, secure, auditable and easy to scale,” said Ken Moore, executive vice president, Mastercard Labs. “When it comes to payments, we want to provide choice and flexibility to our partners where they are able to seamlessly use both our existing and new payment rails based on the needs and requirements of their customers.”

Mastercard blockchain solution has the ability to power secure and seamless non-card payment transactions such as business-to-business payments and trade finance transactions. It also has the ability to power non- payment solutions such as proof of provenance that helps authenticate products across the supply chain.”

These statements can be interpreted to imply that this solution is more private, more flexible, and more scalable than MasterCard’s existing rails – which I don’t believe that for a second since blockchain technology specifically, and decentralized solutions generally, are less scalable, lack flexibility, and implement brittle privacy. In fact, just two days ago Payments Journal published this by Adam Ludwin, the CEO of Chain, in his “Letter to Jamie Dimon:”

“In fact, on almost every dimension, decentralized services are worse than their centralized counterparts:

  • They are slower
  • They are more expensive
  • They are less scalable
  • They have worse user experiences
  • They have volatile and uncertain governance

And no, this isn’t just because they are new. This won’t fundamentally change with bigger blocks, lightning networks, sharding, forks, self-amending ledgers, or any other technical solutions.

That’s because there are structural trade-offs that result directly from the primary design goal of these services, beneath which all other goals must be subordinated in order for them to be relevant: decentralization.”

Looking at MasterCard’s press release suggests that MasterCard has indeed solved the governance problem because this blockchain is owned and operated by MasterCard, utilizes MasterCard’s existing settlement network, and is operated under MasterCard’s existing regulatory construct. I would argue that all of the other challenges associated with a decentralized service remains, unless of course this isn’t decentralized at all.

Given that the only access to this blockchain is via APIs there is no real reason to distribute all aspects of the blockchain. This may as well be implemented on a mainframe, in the cloud, or using a distributed database combined with a SHA-256 scheme to make the database immutable; and these are all technologies that MasterCard is well acquainted with.

I would be remiss not to complete Adam Ludwin’s thoughts on decentralized services, as he does see one huge benefit but the benefit would be very hard, if not impossible, for MasterCard to utilize:


And not only are decentralized applications better at this one thing, they are the only way we can achieve it.

What am I referring to?

Censorship resistance.

This is where we come to the elusive signal in the noise.

Censorship resistance means that access to decentralized applications is open and unfettered. Transactions on these services are unstoppable.

More concretely, nothing can stop me from sending Bitcoin to anyone I please. Nothing can stop me from executing code on Ethereum. Nothing can stop me from storing files on Filecoin. As long as I have an internet connection and pay the network’s transaction fee, denominated in its crypto asset, I am free to do what I want.

(If Bitcoin is capitalism distilled, it’s also a kind of freedom distilled. Which is why libertarians can get a bit obsessed.)”

So I’m left scratching my head wondering what benefits MasterCard or its banks receive when using this API versus the MasterCard Send API. Perhaps I’ll make this my mission for Money 2020 next week.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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