What ever happened with Blockchain
What ever happened with Blockchain?
Blockchain kicked off as a revolutionary spin off technology from the bitcoin currency; a technology intentionally designed to facilitate an encrypted way to transact value, information or data over open networks, disintermediating the cost of the middle person. This promised the replacement of legacy solutions that were not designed for, but needed to adapt to a globally interconnected world. Much excitement followed as blockchain appeared to have the potential of revolutionising every industry’s business models, and that included also financial services. It has been a duo of years now since the ‘Big Buzz’, and with all the bees now gyrating around AI, IoT and API honey pots, it gives us the chance to ask the question:
What ever happened to the blockchain?
The initial madness over the potential applications for Blockchain discussed via the financial ecosystem eventually lodged down into various practical use cases. The most hopeful included simplifying regulatory reporting, compliance and KYC (Know Your Customer), converting paper-heavy trade finance, streamlining reconciliation processes in clearing and settlements. If national banks were to issue crypto-currencies, there could be an chance to revolutionise payments through diminished transaction costs, improved speed, efficiency and transparency.
Nordea and the R3 Consortium
Central to Nordea’s work in blockchain is our membership since two thousand fifteen of the R3 Consortium, which aims to facilitate the common interests of financial institutions in the emerging blockchain space. Our participation in R3 ensures we get first-hand skill of fresh developments, that we establish close cooperation with academics, fintechs and other banks and regulators, and crucially, have a voice to define and influence fresh industry standards.
We recently renewed our commitment to this group by participating in the 2nd round of funding for R3 that gives the consortium the assets they need to proceed further development of the much-awaited Corda Distributed Ledger Technology (DLT) platform, to which we have directly contributed development resources (from our Transaction Banking area).
Blockchain or Distributed Ledger Technology (DLT)?
Corda made the headlines recently when the R3 Consortium mentioned publicly that Corda is not and has never been a blockchain solution. This surfaced an interesting debate in the industry about what is a blockchain and whether we should budge to use a broader term like Distributed Ledger Technology (DLT) instead to define the scope of this technology more accurately. It’s safe to say that this debate is still ongoing.
Debate or no debate, in Nordea, we are going total speed ahead with experimenting and learning in key DLT areas both inwards and outside of the R3 Group. Last year, Nordea introduced Know Your Customer pilot outcomes – executed in cooperation with other Nordic peer financial institutions – that aimed to improve customer practice and providing an efficient KYC process for the Nordic financial sector. The hope is that DLT can usher in more efficient digital identity management and a single source for customer data sharing across banks and for reporting to regulators. On top of this we’re also working with more projects internally.
DLT has slew of untapped potential
The hype machine has moved on, but the wishes around the potential of this technology have not. We at Nordea will proceed to work, experiment and learn so one day our customers can benefit from the enormous potential of this technology, being these swifter, cheaper and more secure banking services or even fresh value propositions.
The truth is that with the speed of switch we see in today’s market and on the consumer behaviour, it is unlikely to predict what the future will look like. Instead, we need to concentrate on learning and building the capabilities which will (like a 3D printing machine) permit us to be pliable and quickly adapt to what the future brings in order to always remain relevant to our customers.
/Erik Zingmark, Co-Head of Transaction Banking at Nordea. Go after me on Twitter: @erikzingmark
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A distributed ledger, for example a blockchain, is a technology that shares information inbetween all parties of a network. Transactions are verified and recorded in the ledger through a process of consensus. This means if the parties don’t verify the transaction it will not go through, which makes the ledger practically unlikely to corrupt. By using this technology, transactions will be encrypted, incorruptible and much quicker.
The R3 team is made up of financial industry veterans, technologists and fresh tech entrepreneurs, bringing together expertise from electronic financial markets, cryptography and digital currencies. R3 operates in Fresh York, London and San Francisco with its playmates to define, design and produce the next generation of financial technology. R3 leads a consortium of around forty five financial companies in research and development of DLT usage in the financial system. Nordea has been part of the consortium since October 2015.
Corda is R3’s purpose-built DLT platform for financial institutions. It made the headlines recently when R3 mentioned publicly that Corda is not and has never been a blockchain solution. This kicked off an interesting debate in the industry about what indeed is a blockchain and whether we should stir to use a broader term like DLT instead to define the scope of this technology more accurately. It’s safe to say that this debate is still ongoing.
The most known distributed ledger is the one upon which the cryptocurrency Bitcoin operates. It is often referred to as “the Blockchain”. However, Bitcoin’s blockchain is just one example of how blockchain technology and a distributed ledger can work. Other distributed ledgers have surfaced, for example Ripple, Ethereum and Hyperledger – with many more on the way.