What’s your Blockchain Strategy in the Decentralised New World?

•September 1, 2015 • Leave a Comment

Setup a google alert on blockchain, and these days you will be overwhelmed by the linkage of articles to blockchain.  At the high level, you probably want to assess if Blockchain is a disruptive technology in your space – if you have no idea what/how blockchain can impact you, then its time to cut to the chase fast, as there is the distinct possibility that the ground under you could change, more than likely forced by disruptive startup’s.

Reducing BackOffice/Legal Cost

The legal terms and conditions, appropriate financial and personal check required to trade, just on a personal level, let alone a corporate level are steep.  Could blockchain offer an opportunity to simply the legal paperwork chain, expedite the process, and reduce the paperwork mountain? Can SmartContracts  offer a solution?  Obvious proof of identify will be key, as it is today – think money laundering.
Eric offer insight into the reason why tokens are not the silver bullet in the world of blockchain.  Tokens have their place, but so do Smart Contracts – We need to have a chat about cryptocurrency tokens.
Private Equity – dealing with the “cap table management problem“.  Have a read of Symbiont CEO Mark Smith view of blockchain and private equity.
Putting shares in private companies on the blockchain, according to Smith, provides a perfect proof of concept for the technology’s capital markets applications.
“What can be done then is transfers to other securities. Because we did straight equity and debt, we demonstrated you can do a bond on the bitcoin blockchain and then you can do it on a permissioned ledger system,” Smith continued.

Disruptive Consortium

We’ve seen over the last few years a number of bank lead consortiums that have been driven by the need for bank to take charge of change, instead of waiting for change to be forced on them.  There have been numerous comments in the press recently from bank employees with regards to the disruptive change the blockchain will bring to finance.  Its inevitable that the banks will need to form a consortium to tackle the challenges to revenue that blockchain could bring. As discussed elsewhere, collateral, post trade, trading and more is being investigated by banks individually, at cost.  A consortium would allow banks to pool their knowledge and resources at an individual lower cost post to decide their collectively future in the world of blockchain, before their lunch is eaten by the startup culture.

Trading Lifecycle

Expect experimentation in ownership, transfer, payment, collateral, and more. Full-featured smart contract language from Symbiont offer a smart securities system, and not just for equities – built-in coupon payments for bond.  Central securities depositories, smart-bonds etc. Goldman sees asset ownership as being in the blockchain sights:
distributed ledger as a technology that would have “massive implications” for asset and ownership transfer.
Barclays and UBS appear to be playing in this space with Ethereum.  Clearly Blockchain is the new nuclear arms race in finance.

SPReD – Securities Product Reference Data

•August 20, 2015 • Leave a Comment

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.

Distributed HTTP

•August 18, 2015 • Leave a Comment

mnot and brewster Kahle both have interesting articles on a possible future for the web, distributed HTTP.  Technologies that may help in the moved to distributed HTTP include JavaScript, Bitcoin, IPFS/Bittorrent, Namecoin, and others.  Namecoin is interesting, and in many ways could possible be the future for DNS?

 

OTC Swaps Margin Disputes – Blockchain?

•August 11, 2015 • Leave a Comment

The FT has an interesting article on collateral utilities, “Banks team up to resolve OTC swaps margin disputes”.  Given a posting on LinkedIn, “Block Chain collateral innovation”, one wonders if the banks have considered Blockchain technology to solving the problem?

Blockchain: Bonds and Shared Replicated Ledger (SRL)

•August 11, 2015 • Leave a Comment

An interesting read on bonds and SRL by Roger WillisTriplentry.  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.

Its also interesting to see Ethereum project discussions discuss “Bond Trading and Blockchain”.  Will also be interesting to keep and eye on Symbiont.

Blockchain: Distributed Consensus Protocols

•August 11, 2015 • Leave a Comment

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

Application and smart contract creation = Ethereum (AWS mining and “Create your own Crypto-Currency”)

Application framework built on top of Ethereum = Eris. Ethereum has gained further press recently around Adept and Provenance.

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)

Blockchain: Smart Contracts

•August 10, 2015 • Leave a Comment

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.

 
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