Tag Archive for: blockchain

Blockchain: Some remarkable announcements part I

| 29-08-2016 | Carlo de Meijer |

blockchainWhile Blockchain is seen by many as a network phenomenon that needs large market participation, collaboration and interoperability to succeed, both R3CEV and a group of four large global banks came with announcements that are at least a bit remarkable. The bank-backed consortium had filed for a patent of Corda (which is contradictory to the need for open standards and protocols), and at the same time a small group of R3 consortium members have expressed their wish to create their own digital currency (while large collaboration is needed).

R3 and Corda patent

R3CEV, the bank-backed consortium this week announced that it had filed for a patent of Corda, the distributed ledger software that underlies its new project ‘Concord’.

Some critics have argued that blockchain-based solutions should not have patents attached. That could not only hinder innovation in the field of distributed ledgers technology over the coming years. But it could also stand in the way of a more massive adoption of this technology.

R3, however sees it different and says that “although Concord will resemble other platforms working on blockchain technology the underlying software Corda has/offers  enough unique features to justify a patent”. “Corda is just one element of the wider Condor platform”.

Corda White Paper

In the meantime R3 also released its first Whitepaper on Corda. It gives an introductory, non-technical overview that explain its vision, some design choices and outlines the key concepts underpinning the Condor platform.

The Corda project that was announced in April this year, aims to create the software that would be central to its wider blockchain-inspired  shared ledger development project, called Condor.

In this Whitepaper it is explained how R3 set themselves the challenge of starting with the various pain points in the financial industry’s: duplicated, inconsistent data and business logic and redundant business processes – and asked themselves “if they could apply breakthroughs in distributed ledger and blockchain technology to solve them”.

Corda is in fact the outcome of the analysis R3 and the participating banks made on how to achieve as many of the benefits of distributed ledger and blockchain technology as possible “but in a way that is sympathic to and addresses the needs of regulated financial institutions”.

What is Concord?

Concord is aimed to become a distributed ledger platform that has been in development for over a year now. Thereby various challenges are assessed such as governance, internal record keeping and regulatory reporting across the financial services marketplace.

R3 describes Concord as a ‘shared-services model’ that still maintains privacy for banks. Concord aims to become a universal software platform connecting bank operations, allowing companies to run high-scale financial applications on permissioned networks across organisations and internally.

This platform that will be designed to record and manage important, financial agreements (read: smart contracts) between regulated financial institutions, aims to digitalise so-called back and mid-office functions, including trade clearing and settling securities trades, asset registry, reconciliation, and even the recording of cash balances.

By moving these middle and back office functions to a secure cloud-based ledger, R3 en its members hope that Concord will significantly streamline present cumbersome operations, and lower the costs of maintain them. By doing that huge cost savings could be realised (billions of dollars).

Traject

A version of Concord is expected to be launched in the next several months. A small number of member banks will begin testing the system early 2017, with an so-called “alpha” version planned to appear by the middle of next year. “We need to make this real to business users in 2017”, according to R3.

It however will be up to consortium members to decide whether to use it or not. Current bank members of the consortium haven’t (yet) committed to using the new Concord platform and aren’t bound to use it. Nevertheless they have invested money and resources helping build it and also have input into Concord’s specifications.

Concord versus Ethereum

Concord resembles Ethereum, another distributed ledger platform, in a number of ways. Just like Ethereum Concord is viewed as a platform that will allow developers to build any variety of applications. But Concord is tailored expressly for financial institutions, and so has different features and functions.

Perhaps the most important difference between Concord and Ethereum is the way transactions will be recorded. With Ethereum every transactions is recorded, verified and disclosed immediately in their respective public, distributed ledgers.

With Concord, while the transaction is verified via a distributed ledger, it is not publicly disclosed, maintaining the confidentiality that was a key concern of R3’s member banks. The details are shared only by the parties involved, or parties to whom they give access.

 

carlodemeijer

 

Carlo de Meijer

Economist and researcher

 

Blockchain : What to expect for 2017?

| 23-08-2016 | Carlo de Meijer |

blockchainWe are now 8 months further on in 2016. Blockchain seems to be not a hype anymore but increasingly becoming a reality. What can we learn from what happened in the area of blockchain up till now. Is it possible to make predictions for 2017 and further? Let’s give a try! 

What happened this year?

On the basis of the various activities and developments during this year a number of trends can be recognised. These could give enough ammunition for a number of predictions on blockchain for 2017.

Increased knowledge sharing
First of all the growing interest and therefor the growing need for knowledge about blockchain. We have seen an explosion of articles, reports, conferences, workshops, seminars, roundtables etc. on blockchain. Many people were educated what blockchain is, its possible applications etc.

Growing investments in blockchain start-ups
We also have seen a boom in the number of start-ups that is developing applications of blockchain technology. They have become very popular among investors. The industry has invested larger sums in these corporates.

Ongoing innovations
These growing investments in start-ups have allowed for ongoing innovations in private blockchain technology, with an increasing number of second and third generation applications popping up.

Consortiums and partnerships coming up
With the believe amongst financial institutions that a go-alone approach is not the right way, we have seen the coming up of a number of collaborative initiatives including R3CEV, Hyperledger project, China Ledger and of various strategic alliances between fintechs, blockchain platforms and financial institutions.

Experimentation and testing stage
Though this year was one of experimentation and testing, with many trials, proof of concepts etc., also first real-world blockchain applications have been launched for small groups but not yet for massive use.

Regulators enter the blockchain scene
What we also have seen is the growing interest and involvement of regulators. Blockchain technology is getting growing attention from various regulatory bodies amid concerns over governance and cybercrime. They try to figure out what is really new about blockchain in case it really takes off.

What can we expect in 2017?

Starting from these developments in the blockchain area, what can we expect for 2017 and beyond?

We are beyond the hype
First of all, looking at 2016, we may say that the blockchain hype is over to a large extent and that 2017 will be a year of practicality. Long-time seen as a hype, just like Pokemon Go, there is growing believe that blockchain is here to stay. Not only financial institutions, but also central banks and governments are nowadays interested in blockchain technology and its potential. This may further broaden the audience of Blockchain believers in a rapid way.

Focus on blockchain integration
Financial institutions will increasingly look for integration of blockchain technology with other areas of the fintech eco system. Existing systems within financial institutions need to adopt to the blockchain element. It must fit in with other banking systems (such as KYC, AML, customer record and other record systems, data warehouses etc).

Integration will not be limited to just installing blockchain technology within their own organisation. It will mean getting many other organisations to adopt and integrate their existing systems with the technology (including businesses proicess and organisational changes). This process may take several years.

Private blockchain networks
While new blockchain consortiums and strategic partnerships will arrive, we will also see an accelerated deployment of private blockchain networks. Multiple networks of trusted platforms each connecting a subset of industry players. This however will ask for an overall distributed ledger, that will be open source with common standards and protocols, enabling interoperability via APIs.

Use cases will be further broadened to non-financial applications
While the focus long time has largely been on applications in the financial world, we will increasingly see blockchain applications in other areas. These may range from decentralised and cloud services including patient records and healthcare support; electronic voting andvoters authentication to cloud based learning and student authentication, digital identity management to land titling and many more. This may allow – just like The Internet – a growing number of people to get in touch with blockchain technology and may open the door to many more.

Blockchain technology will become more mature enabling better and more secure applications ….
Blockchain technology will become more mature, gradually solving issues such as scalability and system integration. We will see more tools and interfaces available. Microsoft Azure for example has started to provide Baas (blockchain -as-a-service) which will enable developers to build more tools. It will allow financial institutions to create all types of tailor made environments using industry level frameworks.

… and also directly-chained solutions
It however will not be limited to blockchain solutions. The technology may also enable directly-chained (instead of block-chained) transactions. In these schemes consensus will be simplified by requiring confirmation just from a limited subset of trusted participants. In these private blockchain schemes that should lead to much faster confirmation times.

In 2017 we will see real-world applications
While 2016 was the year of hit and trial, with many experiments, the banking industry’s proof-of-concept phase will continue according to the Morgan Stanley Report. But 2017 will also see a number of real world applications using blockchain technology.

While the focus long time has been on payments and the securities industry, early real-world blockchain applications will still be limited to use cases such as trade finance, syndicated loans or reference data management, so activities that are not dependent on a critical mass of assets already being on blockchain. Real-world use cases for payments and clearing & settlement purposes however will take several years.

A growing number of market entrants will come with new and more sophisticated innovative offerings for financial institutions. It is thereby expected that they will continue to develop new functionalities for existing blockchain systems to their users, while other applications will emerge.

The year of smart contracts
It is expected that smart contracts will grow in popularity. These contracts that will be stored in the distributed ledger, are getting more accurate and more feasible for real world applications. They are expected to become an integral part of many blockchain solutions. To settle transactions these smart contracts need to be connected to the real world banking system. For banks it is thus important that blockchain will be integrated with their banking systems as well as with their API (Application Program Interface).

Some expect that there will be “a single dominant leading, open source, scalable, enterprise ready, distributed ledger optimised for private blockchain with full support for these smart contracts”. There are a number of organisations working on this.

Growing competition for blockchain platforms
We will see many more platforms to be released. But also increased competition between the various blockchain offerings like Ethereum, Hyperledger, and many more. It is expected that an interface for external users will be developed including APIs, giving others access to the tools will begin to be leveraged.

Increased discussion about standards
The discussion about the need for common industry standards and protocols will continue. There is agreement that common standards and protocols are a must. But not yet next year. There will be multiple networks of trusted platforms all with their own standards and protocols. This however will increase the need for interoperability.

Security gets highest priority
A growing number of institutions are looking at how to use blockchain in their activities. As the blockchain systems may handle more and more assets, contracts and other valuable information, the security part op blockchain applications will get prior attention, to guarantee privacy and integrity of information stored in the ledger.

Regulators enter the scene
Growing focus on security and other risk issues will bring regulators to the forefront. It is expected that regulators will increasingly discuss and operate in collaboration with the industry, to reach the best regulatory solutions for all parties involved. This will help them to develop their policy position towards blockchain technology, assess challenges and benefits of the technology from a regulatory perspective and assess whether new rules are needed.

 

carlodemeijer

 

Carlo de Meijer

Economist and researcher

 

The Corporate Treasurer and Blockchain

| 17-08-2016 | Carlo de Meijer |

blockchain

 

While it has been widely reported that – despite its disruptive character – the majority of banks think that innovations such as blockchain technology will positively impact their business and are exploring how they can use blockchain to their advantage, it is still largely a grey area for many corporate treasurers. But given the various challenges that corporate treasures are facing today, they also need to pay attention to this ‘cutting-edge’ blockchain technology. 

Complex environment

Today’s business environment for corporates that are internationally active can be highly complex from a treasury point of view. The treasury includes basic tasks like cash management, bank relationship management, payments, and corporate investing.

The corporate treasurer strives to achieve optimal working capital utilization to ensure that the financial supply chain efficiently and effectively supports the physical one. It does this by monitoring global cash positions and managing credit facilities across all bank accounts of the group companies to move cash to where and when it is needed.

“Cash management and forecasting are more challenging because of increasing business complexity.  The level of complexity is likely to get worse over the next two years”

In the digital era, real-time insight into a company’s global cash positions and cash requirements and the ability to move monies intraday is increasingly needed to support this changing business environment.

Today’s model of international correspondent banking however does not easily facilitate the ability to manage cash in a real-time environment.

Challenges

Corporate treasurers thereby face various challenges.

A first one is to obtain in a timely manner consolidated information of group-wide multi-currency positions across a fragmented banking network. This is needed to optimize the financing mix and duration of funding against expected and actual enterprise cash flows.

A second key challenge is optimizing the automation of “order-to-cash” and “purchase-to-pay” cycles with an optimal rate of straight-through-reconciliation (STR) of cash to accounting.

Need for …..

Cash management and forecasting are more important than ever for a company’s financial success, but they have also become more difficult to execute. And the pressure to provide insightful and proactive cash reporting and forecasting is only likely to grow. Management outside of treasury needs a better understanding of a company’s cash positioning and forecasts.

To execute in this environment, treasury functions will need to find ways to provide management with information on cash positions and cash forecasts faster and with deeper insight.

So where should treasury start, in order to improve forecast quality despite increasing internal and external forces that adverse impact reporting?

Blockchain enters the stage

But there is a technology available to take the pressure off the modern cash management professional: Blockchain. This technology could fundamentally affect the various areas of corporate treasury  as it could transform how financial transactions are recorded, reconciled and reported.

The potential applications of blockchain technology for the treasury are vast. They may  range from cash management and correspondent banking, to trade finance and documentation, supply chain management, commodity financing and account opening.

Especially for treasury relevant payments, when applying blockchain, these could be executed instantly between the various participants. As the ownership and provenance of transactions can actually be embedded in the blockchain data, blockchain has the potential to be used for mainstream payments, thereby providing  a robust and secure framework for verifying transactions.

Benefits

Blockchain  could have a number of positive impacts on the transparency, efficiency, cost and risk issues currently associated with corporate treasury. This may bring them various benefits.

  • It will allow for improved liquidity management. Blockchain has the potential to enable real-time/instant insight in a corporate’s liquidity position and how quickly they can provide liquidity to their corporate.
  • The transparency brought about by blockchain technology between the various players could bring benefits especially for those activities that need multiple controls such as transfer of payments. Such transfers can be done much quicker and in some instances even instantly.
  • It will also allow for improved risk management. As the credibility of debtors and creditors is supposed to be known at all participants blockchain will also contribute to more security.
  • Treasurers are nowadays under pressure to reduce costs. Blockchain may allow much lower trading costs for banks because much less parties are involved for reconciliation purposes. Some even say it could save banks billions of euros. And if banks could provide their services to corporates at lower costs that might be of great help for treasurers.
  • And what about the use of smart contracts, in which lawyers and accountants essentially act as coders. When two parties enter into a transaction together, the accountant/lawyer/coder inputs into the blockchain what the event they have all agreed on. This event will occur automatically. That might contribute to much greater efficiency.
  • But also from a financial and business strategy issue, blockchain could bring great benefits. Having a clear picture of assets and cash flows, finance has the ability to make strategic investments in shorter period of time, helping to capitalize on potential investment opportunities and evaluate important future transactions.

Take a longer view

Blockchain has the potential to fundamentally change the treasury function at corporates. For some blockchain is even going to be a game-changer for treasury. The change might not be here yet, but it is coming, and treasurers need to take the long view on it.

carlodemeijer

 

 

Carlo de Meijer

Economist and researcher

 

Uitgelicht: Blockchain, een bedreiging?

| 12-08-2016 | Herman van Hazendonk |

blockchainCredit Suisse bracht een aantal dagen geleden het rapport ‘Blockchain; The Trust Disrupter’ uit. Hierin stelden zij dat Bitcoin en onderliggende technologie Blockchain geen grote bedreiging vormen voor het traditionele bankwezen. Swift (Society for Worldwide Interbank Financial Telecommunication) zal echter wel moeten oppassen. In het onderzoek wordt Swift als langzaam, ouderwets en duur beschreven.(bron: finextra.com) Wij vroegen expert Herman van Hazendonk of hij Blockchain als een bedreiging ziet.

“Blockchain kan op termijn zeker een bedreiging vormen voor SWIFT, maar niet alleen voor SWIFT. Op termijn kan het ook een bedreiging worden voor reguliere banken, creditcardmaatschappijen en onder andere notarissen.

De Nederlandse technologie website Tweakers.net heeft eind 2014 een gedetailleerd artikel gewijd aan Blockchain en de mogelijkheden daarvan.

Veel banken (onder andere ING, zoals ze hebben laten zien tijdens het 20 jarige lustrum van de DACT) zien veel mogelijkheden in het gebruiken van Blockchain en proberen hier op in te spelen. Het grote probleem op dit moment is echter dat de technologie nog in de kinderschoenen staat en geplaagd wordt door fouten en kwetsbaarheden in de code. Recentelijk bleek dat maar weer bij bedrijven zoals Ethereum en BitFinex. Meer details over wat er precies mis is gegaan bij Ehtereum is hier in begrijpelijke taal terug te lezen.

Blockchain heeft zeker veel toepassingsmogelijkheden in de (nabije) toekomst, er moeten echter wel eerst een aantal kinderziektes opgelost worden zodat het vertrouwen in de techniek hersteld wordt. ”

hermanvanhazendonk1Herman Hazendonk – Treasury Manager

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Blockchain in Cashmanagement

| 15-07-2016 | Olivier Werlingshoff , treasuryXL |

blockchain

 

Blockchain, het gaat de gehele financiële sector veranderen. Administratie 3.0. Bijna iedereen heeft er wel iets over gehoord of gelezen, Blockchain is ‘trending’. Volgens de PaymentEye was Blockchain het gesprek van de dag op de Tech Open Air conference in Berlijn. Wij speurden het internet af naar een definitie en vroegen expert Olivier Werlingshoff naar Blockchain in zijn werkveld: Cashmanagement.

 

Blockchain – de Definitie

Dit is de definitie die Wikipedia geeft:
Een blockchain (soms naar het Nederlands vertaald als blokketen) is een gedistribueerde database die een gestaag groeiende lijst bijhoudt van data-items die gehard zijn tegen manipulatie en vervalsing. Zelfs de beheerder van nodes kan deze gegevens niet vervalsen. Dit komt door het gedistribueerde systeem.

Investopedia zegt het volgende:
“To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are. Blocks, meanwhile, are like individual bank statements.”

Blockchain – de Ontwikkeling

Blockchain werd in het begin onthaald met veel hoera-geroep, alles zou gaan veranderen binnen de financiële sector. Nog steeds is het een fenomeen dat veel interesse wekt maar toch verschijnen er hier en daar berichten waar pas op de plaats gemaakt wordt. Het zou nog te vroeg zijn om er je voordeel uit te halen, Blockchain is nog niet volgroeid.  (bron: rtlz.nl)

Blockchain in Cash Management

Olivier WerlingshoffOlivier Werlingshoff: Basis van blockchain is dat er een er een grote mate van transparantie ontstaat tussen de verschillende deelnemers. Op het vlak van Cash Management kan dit voordelen opleveren bij zaken waar veelvuldig gecontroleerd wordt, zoals bij overboekingen.

Door blockchain kunnen overboekingen sneller uitgevoerd worden en omdat er minder partijen betrokken hoeven te worden, zullen kosten dalen. Als je het breder trekt zou dit ook van invloed kunnen zijn op de check van gegoedheid van debiteuren en crediteuren.  Omdat de gegoedheid van deze door alle deelnemers bekend wordt geacht zal de zekerheid hiervan stijgen. Kortom op Cash Management vlak kan Block Chain zeker voordelen opleveren.

Zie hieronder het artikel dat de PaymentEye publiceerde over Blockchain op de Tech Open Air conference in Berlijn:

 

B2B Fintech: Payments, Supply Chain Finance & E-Invoicing Guide 2016

| 14-06-2016 | treasuryXL |

The B2B Fintech: Payments, Supply Chain Finance & E-Invoicing Guide 2016 has been released by the Paypers. The guide is a map of the complex and dynamic world of Fintech. Carefully documented, the guide keeps readers informed about the latest developments and opportunities in B2B payments, SCF, and e-invoicing.

The guide offers valuable information for industry professionals, associations, analysts, industry solutions providers and Fintech enthusiasts via a thoughtfully structured journey into the dynamic world of B2B payments, supply chain finance and e-invoicing. Also, the guide is completed by a detailed online company profiles database with advanced search functionality.

Highlights of the report:

  • the future of banking innovation from two leading banks (Deutsche Bank, UniCredit);
  • the most interesting use cases for blockchain in B2B payments and supply chain finance (Aite Group, Innopay, Orchard Finance);
  • how to reinvent the correspondent banking model as we know it today (SWIFT);
  • the challenges for international payments & financing projects (sharedserviceslink, KAE, NAPCP, Token, Future Asia Ventures, INTIX);
  • supply chain finance: a significant new proposition in the financing of trade and supply chains, but what’s next (ICC Banking Commission, Windesheim, Magnus Lind – The Talent Show, Anita Gerrits);
  • the steps needed for successful open & cross-border e-invoicing (Comarch EDI, Fraunhofer Institute, simplerinvoicing);
  • the regulation helps or hinders innovation and growth: up to date insights on PSD2, Directive 2014/55/EU, Prompt Payment Code, etc. (Brendan Jones, EESPA, Asset Based Finance Association, IAAF)

The guide opens an eye on the unique factors that puts the scene in a forever changing game, with new actors, new rules and impediments that require constant innovation and original ideas. The inner architecture of the guide follows closely the most important issues of the moment, trends and developments in payments & financing.B2B payments Report 2016_Cover_The Paypers
Don’t miss out the most comprehensive and up-to-date overview on the global B2B Fintech: payments, supply chain finance and e-invoicing ecosystem. Download your free copy of the Guide here.

Share your thoughts on the topics developed in the B2B Fintech: Payments, Supply Chain Finance & E-invoicing Guide 2016 by commenting on this article or maybe share your thoughts in an article about one of the topics.