Banks continue to look to reduce costs. This week its another consortium of banks (similar in many ways to the collateral problem) that are looking to generate a single source of truth with reference data. SmartStream Technologies appears to be the lucky vendor involved.
An interesting read on bonds and SRL by Roger Willis, Triplentry. Probably also worth reading “Consensus-as-a-service: a brief report on the emergence of permissioned, distributed ledger systems” which offer some financial use cases in section 7.
Dom Steil article on Distributed Consensus Protocols provides an overview of a few of the implements available.
Asset creation built from the Bitcoin blockchain = Sidechains
Asset creation built off the Bitcoin blockchain = Counterparty
Asset ledger creation built on distributed nodes = Hyperledger
One would assume that the investment banking arena is most interested in Hyperledger, MultiChain and Ethereum from an asset trading and post trade perspective – due to Confidential Transactions. Curious also as to what banks are looking at t0 (the trade is the settlement)
ABN AMRO Head of Innovation Arjan van Os make a number of excellent comments worth repeating in the blog posting, “The Next Big Thing”:
“Each node maintains an identical copy of a shared transaction ledger – the so-called ‘single source of truth,’” says van Os. “As transactions take place, the nodes communicate with each other to verify that the transaction is valid. If the ledgers don’t match up, the transaction is rejected. That virtually eliminates the single point of failure: If one server is hacked, the other nodes will recognize the intrusion and block the hacking attempt. The more nodes added to the Blockchain, the more security the transaction has.”
Making explicit reference to Smart Contracts:
One of the ‘hidden gems’ of Blockchain technology comes in the form of Smart Contracts. Through specific scripts in the Blockchain, all conditions of any contractual agreement can be stored, verified and secured within the system. In this way, users can program the exact conditions under which a contract can be executed, thereby mitigating risk and increasing trust for all stakeholders.
Its probably an understatement to say that most banks are in a race to identify how to use cryptocurrencies in the financial sector and get ahead of the competition – as noted by Italian banking group Intesa Sanpaolo:
[the bitcoin protocol’s] potential is far from being fully explored especially as a means to transfer rights and value in a very secure way
Richard Brown has a good posting on smart contracts, and shared ledger, and more interestingly, shared business logic – think collateral management and other such business problems.
If you interested in what CitiCoin and others in finance are doing with blockchain technology, I suspect you may want to start by reading Alternative chain. Storing trades into blockchain will involve a custom transaction and a new network – a bank/exchange network one has to assume. Maybe we’ll see a bank lead consortium setup similar to what the banks did with regards to secure chat services. This leads us to Eris, which is probably worth a look due to its custom blockchain and docker play containers – and bank examples.
Also check out Hyperledger.