A consortium of banks is planning to launch a joint business venture for its in-development blockchain commerce platform.
Aiming to ease European domestic and cross-border trade, the Digital Trade Chain group is building a distributed ledger framework that connects a buyer, sellers, banks and intermediaries to simplify transaction management and tracking.
To that end, the consortium will create a new business entity in the Republic of Ireland, jointly owned by the eight founding banks, that will manage and distribute the offering, now rebranded as "we.trade." The new entity is expected to be formed sometime by the end of the year.
"The commercialization of the platform is expected in Q2 2018. From February 2018, test clients of the founding banks will be able to use the platform," the consortium said in a statement.
First unveiled in January, Digital Trade Chain now counts Banco Santander among its membership, alongside Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and UniCredit – as well as IBM.
The coming months will also see efforts to attract additional parties to the consortium in addition to financial services. One area of focus will be companies involved in the trade process, including in shipping – an industry that has seen rapidly growing interest in blockchain tech in recent months.
The U.S. Patent and Trademark Office has awarded exchange operator Nasdaq a patent for a proposed blockchain-based data matching system.
First filed in February, the patent describes a data transfer and logging system, with a blockchain used to track trades and clearing positions. The patent application was originally published in August and names Sweden-based Johan Toll and Fredrik Sjöblom as the inventors.
According to the text of the patent, transactions within the system occur through a two-step process. Each transaction gets logged in two blocks: one that records the transaction as it comes from the source to the intermediary, and a second as it passes through that intermediary to its destination.
The benefit of the system, the patent's authors state, is that blockchain could serve as a way to boost efficiency in clearing house processes.
"It would thus be desirable to improve the speed and efficiency by which clearing and settlement, or both clearing and settlement processes may be performed in a computerized environment. Accordingly, it will be appreciated that new and improved techniques, systems, and processes in this area of technology are continually sought after," they write.
Nasdaq has filed multiple intellectual property applications relating to blockchain, including a proposed way to back up a blockchain-based exchange system. Indeed, the rate of patent applications related to the tech generally has grown significantly in the past year.
After signing up more than 100 businesses to build enterprise distributed ledger technology compatible with the ethereum blockchain, the group has added Sberbank, the nation's largest bank, to its growing list.
Revealed in interview with CoinDesk, Sberbank framed its addition to the alliance as a new way to capitalize on international markets.
Evgeniy Kravchenko, head of trade finance and correspondent banking at Sberbank, told CoinDesk:
"The next step for our blockchain team will be operations with foreign-based financial institutions and other banks, to do some international transactions, to see how we can increase the transparency and improve the trust between banks and corporate clients."
Already, Sberbank reported that it has completed at least two blockchain proofs-of-concept – one for a "smart" letter of credit and another for a letter of guarantee – working in cooperation with regulators, the minister of the economy, other banks and Russia's International Chamber of Commerce.
Kravchenko, however, said that its entrance into the EEA is part of a bid to go beyond the initial use cases its already tested.
"We'll be working with other banks on projects in other business areas, apart from trade finance: payments, lending, retail, everything that's possible," he added.
But Kravchenko was keen not to suggest that he's limiting the scope of Sberbank's work just alliance members.
Instead, he says the bank is interested in continuing to work with Russian banks who aren't members of the EEA on new and existing projects.
"The more players on the network, the better the network will be," said Kravchenko.
But Kravchenko is no blockchain maximalist. In fact, Kravchenko himself imagines a world where blockchain might not be exactly as necessary as some supporters think.
Using the Sibos conference as an example, he said it remains unknown if the technology could, say, replace or replicate the services offered by Swift, the interbank messaging service that also serves as conference host.
"I think blockchain may influence all the parties who are represented here, because all the banks are here, Swift is here. But the main message from my side is we need to do it together and jointly with other players."
The cryptocurrency market has been experiencing exponential growth throughout 2017. With Ethereum making the jump from $40 to $320 at the time of writing, and Bitcoin shattering previous records with all-time highs, plus eight other cryptocurrencies with a total market capitalization over $1 bln, the entire ecosystem has reached a market value of over $170 bln.
While the value of cryptocurrencies and associated projects continues to grow, the underlying technology behind the digital assets, Blockchain, has been implemented in the worlds of financial services, supply chain logistics, healthcare, music, and more. Blockchain technology represents a potential disruption of nearly every conceivable industry, even being employed by federal and local governments, and international organizations like the United Nations. At least eight states in the US have begun drafting Blockchain legislation including New York, Arizona, Illinois, and Delaware.
As more organizations pioneer research into Blockchain and cryptocurrency-based solutions, the marketplace is becoming flush with applications built to serve a wide variety of use cases. These applications are making it easier for users to buy, hold, trade, and use cryptocurrencies in their day-to-day lives.
Consider the growth of the Internet: originally a closed ecosystem meant to facilitate communication, once the Internet opened up the possibilities were nearly endless, though it wasn’t until protocol layers like HTTP, HTML, and the URL were created that developers could build on it and turn the Internet into something useful. Although the obvious applications of Blockchain technology are within financial services and payments processing, several organizations and groups are actively exploring how Blockchain can revolutionize other industries. Giants like IBM, Microsoft, Goldman Sachs, and Maersk are developing Blockchain solutions within their verticals.
On a more tangible level, cryptocurrencies are now being accepted at major retailers.
Over 80 businesses are known to accept Bitcoin as a form of payment, and the list continues to grow. Among them are Microsoft’s Xbox and Windows Store platforms, online travel agency Expedia, and electronics retail website Newegg. Many merchants creating online stores using Etsy and Shopify have begun accepting payments in Bitcoin as well. Japanese department store Marui has implemented Bitcoin payments in one of its largest locations, to much hype.
One of the pioneers is Overstock, the eсommerce giant that started accepting Bitcoin as payment in early 2014, earlier than any other major brand in the eсommerce space. Overstock accepts over 40 different cryptocurrencies as payment, appealing to a wide audience of cryptocurrency users. With consumer preference shifting away from traditional retail towards online shopping, and interest in cryptocurrencies rapidly growing, there exists an overlap in tech-savvy consumers actively seeking out opportunities to use digital assets. Companies that support the cryptocurrency movement are establishing themselves as thought leaders and innovators, ready to position themselves to take advantage of this new technology. Bitcoin adoption has helped drive the daily transaction volume well beyond 250,000 per day, over 100,000 more than January 2016, and more than double the daily volume in January 2015.
The decentralized technology also represents a significant leap forward in electronic security. Blockchain-encrypted distributed systems are the ultimate means to store and utilize private data, meaning industries like healthcare data, identity protection, and advertising are soon likely candidates to see major disruption from Blockchain tech.
Companies like Civic are leveraging the high security afforded by Blockchain tech to give users control over their personal data, letting it only be used and accessed when they expressedly allow it.
In a similar vein, developing decentralized search platforms are putting browsing data back into the hands of the users, by facilitating direct connections between consumers and businesses making third-party ad networks obsolete.
Giving users control over their data is a significant shift towards a more frictionless digital/physical experience in daily life. Businesses will be able to reach their ideal customers more effectively, creating a thriving, cryptocurrency-based economy.
Wall Street banking giant JPMorgan Chase is launching a new interbank payments platform powered by blockchain, the firm announced today.
With the participation of two other banks – Australia-based ANZ and the Royal Bank of Canada (Australia) – the Interbank Information Network (IIN) will be built on Quorum, the ethereum-based blockchain network first unveiled last fall. Additional institutions are expected to join the initiative in the coming months, with a specific focus on the correspondent banking market.
Emma Loftus, head of global payments and foreign exchange for JPMorgan Treasury Services, said in a statement:
"IIN will enhance the client experience, decreasing the amount of time – from weeks to hours – and costs associated with resolving payment delays. Blockchain capabilities have allowed us to rethink how critical information can be sourced and exchanged between global banks."
It's a notable application for the bank, given that its treasury services clear trillions of dollars in transactions per day. Previous reports, including a February 2016 story from the Wall Street Journal, indicated that cross-border payments had emerged as a key use case area for the bank.
And in spite of its CEO's anti-bitcoin stance, the cryptocurrency's underlying tech has been an area of growing focus for the bank in the past year, as seen in its work with Quorum as well as initiatives like the Hyperledger Project and the Enterprise Ethereum Alliance.
BNP Paribas Securities Services has partnered with Indian IT firm Tata Consultancy Services (TCS) on a new pilot that will see the two firms apply blockchain to a new asset servicing data platform.
According to a statement, the companies will launch a blockchain-based platform said to offer faster and more secure corporate event announcements. The ultimate aim of the partnership is to curb inefficiencies and errors that occur via the "cascade" of information that is sent to global clients through various intermediaries.
BNP Paribas will capture and store structured corporate information using TCS' Quartz blockchain solution, combined with its Swift-certified BaNCS for Corporate Actions platform. The goal is to ensure that the data is "tamper-proof, resistant to node failure and recoverable," the firms said.
Currently in beta, the platform – called Corporate Event Connect – will collect asset servicing information for corporate actions from over 90 markets, and will use deep learning technology to translate announcements into seven languages.
According to Philippe Ruault, head of digital transformation at BNP Paribas, accurately managing the information on corporate events has long been a "pain-point" for the industry.
"Blockchain is proving to be an extremely useful technology for us, and it is particularly exciting to build a digital ecosystem in cooperation with our clients and partner providers to deliver such a key service," he said.
The Corporate Event Connect platform is expected to be rolled out in phases, though no timeline was provided for when that process will begin.
The biggest threat for our future, according to Elon Musk, is the development of artificial intelligence (AI).
As Musk recently pointed out:
“I think we should be very careful about artificial intelligence. If I had to guess at what our biggest existential threat is, it’s probably that. So we need to be very careful. I’m increasingly inclined to think that there should be some regulatory oversight, maybe at the national and international level, just to make sure that we don’t do something very foolish.”
Musk addresses a couple of key issues. The first is how we should take care when it comes to the implementation of AI. The second, and perhaps the most important challenge, is how can you regulate and oversee this technology?
In today’s rush to adopt machine learning and AI techniques to gain a competitive advantage, there is a real danger that the technology will be deployed in an unsuitable field. This ultimately results in bias and unfairness becoming encoded in our society.
Cathy O’Neil in her book Weapons of Math Destruction lays out the dangers currently present when it comes to the rapid and unthinking adoption of machine learning and AI in a variety of different fields, including US prison sentencing and education. Her main thesis is that predictive models are never neutral but reflect the goals and ideologies of those who create them. They also tend to load the dice against poor people, reinforcing inequality in society.
From calculating university rankings or credit ratings and processing job applications, to deciding what advertising you see online or what stories appear in your Facebook news feed, algorithms play an increasingly important role in our lives.
This leads to the conclusion that when it comes to the design phase of machine learning, we must ensure that we have tested for and avoided obvious biases from the historic data and the data input itself.
However, it says little about how we might effectively regulate the technology in real time. One option to consider is Blockchain, which has a crucial role to play in the regulation of machine learning and AI technologies. Having an immutable, tamper-proof record of actions is a key mechanism to allow regulation to be performed on autonomous AI entities.
Blockchain can also enable access control for any autonomous AI entity based on the reputation of that autonomous agent. After all, possibly the only sanction that you can apply to a non-human autonomous AI entity is to terminate it; or if you do not have that power, remove access rights to the community. You could consider this a modern day “excommunication.”
So, if we imagine a future where standards are defined around what AI has to write to the Blockchain and the access control mechanism that essentially looks at the “reputation” of the autonomous AI entity, then we have a mechanism that can create a control that is impossible to circumvent by any autonomous AI agent.
If we look at this from a philosophical perspective, the closest approach stems from the English philosopher Thomas Hobbes who wrote the seminal text Leviathan. In this work, he describes the need for citizens to give up some of their power to a ruler or “leviathan” for the good of society.
Much has been written about “perverse instantiation,” where consequences occur that were unforeseen by the creators. However, very little has been written about how we might actually create a leviathan to regulate AI and machine learning.
Enabling an AI leviathan that can enforce identification and reporting by AI autonomous agents to a Blockchain. The immutability of this Blockchain ensures no AI agent can tamper with it, therefore establishing a reputation ledger for all autonomous AI agents. This leviathan would effectively police the agreed set of rules and deliver sanctions if they are not met.
Many have reported on the use cases of Blockchain that keep spring up everywhere. Not to put too fine a point on it, but Blockchain’s most important use case could be this: the survival of humanity.
New patent filings from Chicago Mercantile Exchange (CME) highlight how the firm might use blockchain to store and execute financial transactions.
According to two applications released by the U.S. Patent and Trademark Office (USPTO) on Thursday, the commodity derivative exchange may be looking into developing a transaction platform able to execute transfers automatically at times defined by the parties involved.
The two applications, which primarily differ in the specific language used to describe the potential invention, outline how the platform would be housed on a system of computer processors, utilizing a distributed ledger as the basis for recording transactions.
CME could use this blockchain to catalog every update, using unique cryptographic keys to identify individual transactions and modifications, thus marking every action committed by different parties involved with the data.
The system would be able to let party A know as soon as party B requests a change or modification to a transaction, allowing party B to choose whether or not to validate the change. If both parties validate the change, the ledger would update to reflect the confirmation, but if a party declines the change, the ledger would instead generate a rejection message.
While CME's concept is primarily focused on financial transactions, the system could be applied in other fields, the applications say – including with different regulatory or licensing agencies which issue certifications and licenses, such as passports, visas, and driver's licenses.
The ledger could also potentially be used to verify those credentials by allowing a third-party to check with the issuing entity.
The president of the World Bank had some positive things to say about blockchain during a media appearance yesterday.
Speaking with CNBC, Jim Yong Kim said that the technology is "something everyone is excited about" – a statement that he followed up with a cautionary argument about cryptocurrencies.
"[B]lockchain technology is something that everyone is excited about, but we have to remember that bitcoin is one of the very few instances. And the other times when blockchain was used they were basically Ponzi schemes, so it’s very important that if we go forward with it, we're sure that it’s not going to be used to exploit," he told the network.
The World Bank – a financial institution that lends money to national governments – is no stranger to blockchain. It launched a blockchain development laboratory this past summer, and has supported research projects that seek to apply the tech in areas like capital formation.
Kim went on to compare cryptocurrencies unfavorably to payment systems like those operated by Chinese e-commerce giant Alibaba
“It takes three seconds, three seconds, to transfer as much as $160,000 to anybody who’s part of the Alibaba network, because they can assess creditworthiness in three seconds," he said.
Once considered perhaps the largest middleman at risk of being disrupted by blockchain, Swift took a notable step today toward becoming a disruptor.
Revealed on the eve of its largest annual event, Sibos, the inter-bank platform, along with six banks including BNP Paribas, BNY Mellon and Wells Fargo, has deemed its flagship blockchain trial a success from both a technical and business perspective. First announced in January, the proof-of-concept tested whether moving funds stored in nostro-vostro accounts for international transactions to a blockchain could free up those funds to further investment.
But in spite of the PoC achieving multiple objectives, Swift says there's still a long way to go before implementation, primarily since its 11,000 members will not benefit equally from the project
In conversation, Swift's head of R&D Damien Vanderveken explained that some banks that have invested heavily in traditional, centralized solutions for nostro-vostro accounts are already experiencing efficiency gains, and as such might not be as keen to invest in a blockchain-based solution.
Vanderveken told CoinDesk:
"The PoC demonstrated that it can fulfill the requirements. The business value depends on the level of automation of the participants. We will need to make sure for the final solution that we take care of the different levels of investment."
As a result, instead of a one-size-fits-all solution, Vanderveken said each Swift member will eventually have to analyze the value offered by blockchain and weigh it against the costs of implementation.
Benefits of blockchain
Built as part of Swift's Global Payments Innovation initiative (GPI) within its newly revealed DLT sandbox, the PoC uses the open-source Hyperledger Fabric platform to test two main applications.
The first used real, anonymized production data from each of the banks to provide "the account owner and the account servicer a complete view of all the nostro-vostro accounts that they own or serve," Vanderveken said.
The second simulated back-office procedures, which gave the participants a node hosted in the cloud to test the benefits of moving funds from multiple accounts to a single distributed ledger.
These two applications provided users not only increased visibility of and access to available funds, but also simplified the reconciliation process, which uses Swift's ISO 20022 standard.
"The feedback from everybody is unanimous," said Vanderveken. "What we have built in terms of applications actually does meet the requirements."
While the nostro-vostro blockchain PoC was deemed a success, Swift also noted several limitations.
In particular, Vanderveken said Swift is concerned about the possibility that cryptographic security could be hacked with quantum computers. A technology still in the proverbial petri dish, the thought has pushed Swift to create a "hybrid architecture," where some transaction components were distributed on a blockchain, while others were "operated by a neutral third-party."
At the top of the list for the latter was the identification of participants, or as Swift described it earlier this month in a paper jointly written by BCG Financial, "a universally trusted global KYC registry."
For businesses like Swift, which operate in permissioned systems, this is considered a crucial security feature.
"If you want to ensure data confidentiality, and you don't want to rely solely on encryption — which is prone to failure in the long run as encryption becomes hacked by technology progress — you need to have solutions where data is then segregated."
Swell for Sibos?
This successful test of Swift's blockchain PoC is particularly notable leading up to the Sibos conference in Toronto, since the financial incumbent has stiff competition with distributed ledger startup Ripple hosting a competing event called Swell.
Twice during Sibos, Swift will demo the PoC in front of a live audience. But while participants (of both events) perform their own cost-benefit analysis of blockchain, the second phase of Swift's POC will already be underway.
Since Sept. 27 financial institutions — including ABN Amro, Deutsche Bank and JPMorgan Chase — have been validating the PoC results, with a final decision expected by the end of year.
But one thing is certain, Vanderveken said Swift only intends to move forward in implementing the new technology if its members benefit.
"We need to take care of the differences of the various banks to make sure such a solution is successful."