What is blockchain public
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Blockchain is a distributed ledger technology that allows for real-time, transparent transactions between counterparties without intermediaries. It replaces traditional clearinghouse and reconciliation models by giving all counterparties a shared real-time ledger where transactions are applied simultaneously. This reduces costs and risks compared to current systems. Blockchain ledgers are robust due to cryptography and distribute networks, and make tampering difficult. A variety of public and private blockchain applications are emerging for areas like finance, legal contracts, trade, and digital assets. However, challenges remain around system risks, regulation, and realizing cost savings.
What is blockchain public
- 1. What is Blockchain? Scott Wilkinson June 2016
- 2. • If asked then ‘what is the Internet’? – Dial-up modem, finicky software – Netscape Browser, Email, Chat-Room … AOL, Compuserve • In 2016 Internet means much more… – TV, Movies, Music services – Facebook and social media – Ubiquitous, real-time, broad-band – Low cost computing and connectivity – Companies run on internet infrastructure • Blockchain could be same thing for financial services companies… Amara’s Law – Real time – Sharing ledgers between systems, vendors in ecosphere – Standardization and transparency Remember 1994?
- 3. • Blockchain technologies describe distributed ledger technologies that enable real-time, non-repudiable transactions between counter parties. – Every counter-party has a real-time ledger … Transactions are applied to all ledgers simultaneously … makes fraud complex – Enacts message in real time – Defines and protects a given “true” record – Transactions are transparent, historical, forming a “chain” on a given company, or specific instrument history. – Traditional 3rd party roles such as clearinghouses are not required – Reconciliation is automated What is Blockchain?
- 4. • Real-Time, Non-Repudiable – Hastens transactions …. to immediate • Cost Savings – Replacing intermediaries in transactions (clearing houses et al) – Reducing costs / risks of reconciliation – Position/regulatory reporting • Robust – Cryptography – Distributed networks with failure resistance – Scalable • Accurate – Documents, records, transactions agreed on and encrypted – Tampering expensive/difficult Why are Blockchains Being Considered?
- 5. • The Clearinghouse Model(s) – Industry intermediary to facilitate trade and transactions – Example TMX, CDS • The Transaction Facilitator Model(s) – Intermediary such as a bank to enable payments • The Messaging Model(s) – Intermediary such as SWIFT to enable communication of instructions • True Source Model(s) – Intermediaries that validate and maintain legal/certificates (eg. Title) Blockchain Replaces 4 Business Models
- 6. Concept 1: Today’s Securities Model Counter Party 1 Counter Party 2 Counter Party 3 Counter Party 4 Counter Party 5 Counter Party 6 Counter Party 7 Counter Party 8 Clearinghouse • Time to settle • Cost of Clearinghouse • 4x Reconciliation / NIGO clouds • Clearinghouse counterparty, defines membership
- 7. Concept 2: Blockchain Ledgers Counter Party 1 Counter Party 2 Counter Party 3 Counter Party 4 Counter Party 5 Counter Party 6 Counter Party 7 Counter Party 8 • Real Time/Non-repudiable • All ledgers updated (transparency) • No reconciliation • Direct counterparty, all counterparties in blockchain network
- 8. • Unique documents and chain of transactions. – Blockchain cryptography can be used to create definition of “true” document, changes in document and show history of use/ownership in real time. • Use cases: – Legal documents – legal, real-time record of backlines and proof of authorization. – Bonds/Securities/GICs – Unique certificates can show ownership in real time and history of ownership without impacting issuer books/transfers. Also communicate special/unique elements that define value. – Trade finance – Definitive invoicing, real time item tracking and customs audit – Invoices – Shared in real time with counter-parties, regulators etc. Concept 3: Blockchain “Chain Value”
- 9. • Blockchain can be used to replace value facilitation roles and messaging. Concept 4: Transaction Facilitation Traditional P2P Payment Blockchain P2P Payment • Crypto Currencies • Direct advice • Open access
- 10. • There will be a variety of public, limited counter-party, private and internal applications of blockchains. – Definition of Blockchain in use will evolve. • Counter-Parties and stakeholders • Blockchain data and use pattern • Systemic risk and importance – Early experiments have been mixed • RPM pilot • Ripple • Bitcoin • R3 – Government of Canada is pushing for more roles • Bank of Canada • CDS/TM Concept 5: Blockchains Will Evolve
- 11. • Crypto-currency • HV Payments • Securities, bonds, GICs • Legal document retention • Trade finance • Public land title • Internal finance applications • Music / movies / IP Future Use Cases
- 12. • Legacy inertia • Role of messaging, clearing house and facilitation models • Access to Blockchain networks – Selection of counter-parties – Enforcement risks – Regulation • Systemic risks (real time, immediate) – Flash trade risk – Intermediary SRO, Stabilization, Vetting roles • Cost savings realization • Transparency/privacy and arbitrage • Fraud/Gaming of system • Public/Open, Closed and Internal uses Risks of Blockchain