Blockchain, Baby!


With the recent shift in FinTech news and hype moving toward artificial intelligence and machine learning, blockchain almost started to seem like last year’s model. At the same time, predictions that 2017 would see real pilots are starting to come to fruition.

I took notice again the week before last when I saw that Northern Trust had announced an operating blockchain system, one of “a frenzy of blockchain projects and partnerships designed to help financial services firms become quicker and more efficient at a plethora of things from trade finance to securities settlement to loans and debt tracking to cross-border payments,” as Peggy Crossman put it in American Banker.

Ms. Crossman also provided a good overview of how much and how quickly blockchain thinking and development has evolved over the last few years. “One thing many agree on: Blockchain technology is inevitable for this industry,” she concludes.

Last Friday, U.S. Federal Reserve chairwoman Janet Yellen suggested that the Fed would maintain the securities portfolio on its balance sheet while likely increasing rates. On the same day, Fed governor Jerome H. Powell promoted the developing faster-payments system in the United States in a speech that presented the Fed’s overview of and opinion on faster payments, distributed ledger technology, and the development of a digital currency by a central bank.
It comes down to a cautious Fed balance: faster payments, yes; blockchain, probably; digital currency, not likely. Here’s the summarizing passage:

“In the United States, a faster payments system that operates around the clock and provides the capability to hold and transfer deposits insured by the Federal Deposit Insurance Corporation in real time would go a long way toward providing the low-risk and flexible payment arrangements that paper currency historically provided. Indeed, I would expect private-sector systems to be more forward leaning than central banks in providing new features to the public through faster payments systems as they compete to attract retail customers. A central-bank issued digital currency would compete with these and other innovative private-sector products and may stifle innovation over the long run.”

On to this week’s links:

A blockchain in 200 lines of code

If you’re not quite sure what blockchain is from a technical perspective, take a look at this piece from Lauri Hartikka. “The basic concept of blockchain is quite simple: a distributed database that maintains a continuously growing list of ordered records. However, it is easy to get mixed up as usually when we talk about blockchains we also talk about the problems we are trying to solve with them.

Business giants to announce creation of a computing system based on Ethereum

About 30 companies, including JPMorgan Chase and Microsoft, are announcing the formation of the Enterprise Ethereum Alliance, which will create a standard version of the Ethereum software for businesses internationally, the New York Times reports. “Ethereum has this massive advantage of having the public network that has been tested for two years,” Marley Gray, principal blockchain architect at Microsoft told The Times.

How blockchain is changing finance

The degree to which blockchain will upset the status quo will depend on how banking incumbents react. “Throughout history, leaders of old paradigms have struggled to embrace the new. Why didn’t AT&T launch Skype, or Visa create Paypal? CNN could have built Twitter, since it is all about the sound bite. GM or Hertz could have launched Uber; Marriott could have invented Airbnb. The unstoppable force of blockchain technology is barreling down on the infrastructure of modern finance,” writes Alex Tapscott and Don Tapscott for Harvard Business Review.

What the new Congressional Caucus could mean for bitcoin

In an effort to create policies for the emerging subsector, Reps. Jared Polis and David Schweikert launched the Congressional Blockchain Caucus in early February. “Given [President Trump’s] strong focus on security I see it as unlikely that he would give the benefit of the doubt to any technology, including virtual currencies, which has a whiff of impropriety,” Spitzberg Partners associate Steven Ehrlich told Bitcoin Magazine.

A brief history of blockchain

Blockchain has recently heralded as a system that will bring transparency and decentralization to the finance sector. But how exactly did it come to be? Vinay Gupta breaks down a short chronology of computer scientists, cryptographers and mathematicians who created the foundation of cryptocurrency.

‘Big Four’ firm EY begins blockchain ID platform rollout

BlochExchange enables clients to create a customer identity using traditional know-your-customer processes and manages the distribution of that information to other members within the blockchain world. The technology behind this will ease the customer onboarding and verification processes, writes Jonathan Keane for CoinDesk. “It’s also allowing us to engage on a considered basis with other large blue chip companies and give them comfort of the systems and processes we have put in place,” BlochExchange CEO Andrew Coppin told CoinDesk.