Blockchain Use Cases

Think of a “Public” Pub/Sub Queue

SWIFT Institute: “Little short-term payoff”● “Impact and Potential of Blockchain on the Securities Transaction Lifecycle”● Opportunity: Cost and risk reduction● Challenges & Constraints

○ Regulatory support required,○ Institutional board-level support necessary,○ High investment with little short-term payoff

● Technical choices○ Access Rights: Permissioned v. Permission-less○ Deployment progress: Iterative v. ‘Big Bang’○ Business Process Re-engineering pre-requisites

Accenture: “Not mature enough”● “Delivering an industry-standard platform through community collaboration”● Opportunity to● Benefits

○ Trusted information propagation○ Full Traceability○ Simplified reconciliation (settlement)○ High Resiliency

SWIFT & Accenture: “Not mature enough”● Requirements, Challenges & Constraints

○ Strong governance○ Data controls○ Regulatory compliance○ Standards (or lack thereof)○ Identity framework○ Security & Cyber defence○ Reliability ○ Scalability

A Simple Use Case

A B

D

EF

G

H C

● Inter-organizational systems integration

Simple Use Case

Blockchain as persistent “Public” Pub/Sub Queue A B

D

EF

G

H CPeer Peer

PeerPeer

● Shared ledger, ● Events, ● Smart contract, ● Consensus network

Simple Use Case

Technical Advantages ● Mutual Ledger

○ A single source for all messages from any actor to any actor. ○ Fewer point-to-point integrations and batch file exchanges. ○ Metadata source identified in the message itself.

● Distributed○ Better availability

● Immutable Persistent Messages○ One agreed source as part of overall Financial Services system upgrade replaces multiple file

archives and simplifies audit processes.

● Real-time(ish)○ Real-time(ish) settlement, rather than ‘tail-chasing’ batch files and lagging reconciliation.

Simple Use Case

Technical Challenges● Standardization

○ Most firms want to rent the platform, the business applications and the business process.○ A Business Process Re-engineering challenge for vendors.

● Cross Institution Consensus Mechanism○ Centralized platform ala clearinghouse.○ Permissioning for security?

● ‘Mining’ Incentive and control○ Built into ‘rented’ shared service like clearing houses.○ BitCoin for all? Is it how you pay the rent?

● Integration○ Blockchain integration to Systems-of-Record needed.

Adoption

Too Big to Change?● Predicted Large Financial Institution adoption cycle

○ Early Adopters■ 2016: Demonstration, tutorials, Proof-of-concept systems■ 2017: Proof-of-concept systems become pilots (low message volume)■ 2018: Catch on to VC funded accelerators

○ Early Majority■ 2018: Bank system refresh cycle funding■ 2020: Funded projects to join emerging communities

● Disrupters - First Movers?○ Facebook - Google - Amazon (any European or Japanese entity?)○ Baidu - Alibaba/Alipay - Tencent (China)○ Developing markets, not Developed markets?

Adoption

Single Process● Verified by Visa - 3DSecure

○ Multiple Acquirers, Issuers and Schemes - One Blockchain?

● Card purchase chargeback process

○ FDC + TSYS + Card Schemes ++, One blockchain?

Adoption

Single Product● Peer-to-Peer Lending ● One Chain to Bind them All

○ Multiple Lending Platforms (brokers),

○ Multiple Investors,○ Multiple Partner Banks

■ Loan payment processor?

○ One blockchain for greater mix-

and-match flexibility, asset

ownership tracking, asset transparency?

Adoption

Likely Industry Processes

● Virtually all securities processes○ Trading & settlement, depository, lending, portfolio creation and balancing, securitization

● Global Payments○ SWIFT rewrite of global payments and settlement systems based on need for more

transparency and better security

● Regulatory reporting○ Proof of delivery (nonrepudiation) and timestamping○ Know-Your-Customer and Anti-Money-Laundering

■ KYC and AML components of all financial processes

● Regulatory arbitrage, avoidance?○ Any process with highly variable regulatory and compliance costs?

Simple Use Case

Likely Organizations

● Integrated Financial Institutions○ “On Us” credit card processing?○ Bank loan and payment processing?

● Multi-tenant banking platform vendors● Payment card schemes (Visa, MC, etc.)

○ As trusted blockchain guardian

● Integrated Manufacturing○ B2B partner negotiation - the old EDI