Blockchain series feb 2017

Unpacking blockchain:  
An interview series
January 2017
NEST INSIGHTS

NEST INSIGHTS: Unpacking blockchain
INTRODUCTION
What is it about blockchain that so excites the cognoscenti?
Is it as significant as the development of double-entry bookkeeping to the recording and
reporting of financial information? Or should blockchain be thought of as the TCP/IP of
financial communication that will usher in an era of uniformity across networks?
This is not simply a matter of speculation for the financially-minded geek. Indeed,
nothing is more telling of blockchain’s broader significance than that in an era of
aggressive cost-cutting, financial institutions are funding projects to apply a technology
that very few senior executives can effectively define. The consensus across stakeholders
is that this extends well beyond the back office and into the domain of strategy that
banks adopt in response to emerging technologies, the business models they enable,
and the media they provide for client communication.
If blockchain offers more than a one-size-fits-all solution to taking costs out of an existing
business, what applications and benefits can we expect? To answer this question, we
have compiled a series of interviews with a range of participants across blockchain’s
value chain. In each case, we have focused on the application of blockchain rather than
a pro forma assessment of its potential. Our objective is not to argue a case for or against
blockchain, but to inform and broaden the debate on its significance. In this regard, a
common theme quickly emerges that we are only at the beginning of a journey that is
not about the nature of the technology but the end to which it is applied.
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Unpacking blockchain
READ THE SERIES
PAGE TOPIC
2 Introduction
4 Accelerating ﬁnancial inclusion with blockchain
An interview with Pavel Bains, Bluzelle
7 Working towards a world of many chains
An interview with Brian Behlendorf, Hyperledger
11 How close are we to T+0 with blockchain?
An interview with Oliver Bussmann, Bussmann Advisory
15 Building a smart contracts platform
An interview with Henrik Hjelte, ChromaWay
18 Investing in blockchain
An interview with Antony Lewis, R3 Research Lab
21 Integrating blockchain in a ﬁnancial institution  
An interview with Altona Widjaja, OCBC Bank
3

Accelerating financial inclusion with blockchain
Hi Pavel. First, tell us, how did you get involved with blockchain?
In spring 2014, after hearing about Bitcoin and wondering what it was all about I started
reading everything I could on it. I was enamoured with the underlying technology and its
beauty in mathematics, cryptography, AI and economics. I saw all these ideas I had in my
head five years earlier now at a point where this technology could make them happen. I
used to wonder, how could that woman living in a village in India making saris make
more money by sending it to my wife than going through so many intermediaries. That
woman just wants to trust she gets paid, my wife wants to trust the product gets to her.
Blockchain can eventually make that happen.
What is Bluzelle?
Bluzelle is an international mobile wallet network. Mobile wallets are the way the
underbanked are currently entering the financial world. However these mobile wallets are
like islands to themselves. They aren’t interoperable and have limited services. We’re
building bridges between those islands so they can grow their services for consumers.
Our goal is to accelerate financial inclusion and this is how we are doing it.
4
Pavel Bains
CEO, BLUZELLE

Where does Bluzelle sit in the overall blockchain infrastructure?
We use blockchain as an enabling technology for the Bluzelle Network. It provides one
part of our rail for clearing and settlement but we also have many other components
running on top such as payment switches. For some of our other products we leverage
Ethereum around insurance and KYC.
Throughout 2016, Bluzelle was doing a lot of work with banks and other financial
related companies. Can you share some of the experiences and some of the
customers?
We are very well versed in different blockchain technologies and saw a need for financial
institutions to “future-proof” themselves. As a result we delivered several pilots and POCs.
One was with Temenos, a global leader in banking software solutions. We integrated our
payments product, Bluzelle Altitude, into their core banking software. By demonstrating
this, we enable any bank using T24 to start doing payments internationally in real time
over the blockchain.
You recently relocated from Vancouver to Singapore. Do you see more potential for
blockchain in this region?
As one of the top five financial centres of the world, it made sense for us to set up
operations in Singapore. We see huge potential for blockchain technology because the
Asia Pacific region consists of many financial services businesses operating in multiple
countries. Plus, with more than half the world population in the region, people and
businesses will need faster and cheaper ways to move money. So with mobile
technology adoption and more population movement across borders, blockchain is ideal
to power the financial infrastructure and products that will be required.
5
I used to wonder, how
could that woman living in
a village in India making
saris make more money
by sending it to my wife
than going through so
many intermediaries…
Blockchain can eventually
make that happen.
”

Aside from banking, are you looking at other industries such as insurance? Can you
describe the use cases you are interested in?
We can’t divulge names but we also delivered smart-contract based insurance products
for global insurers and have a KYC-shared ledger system being deployed with real banks.
People need new insurance products that have lower premiums and better reflect their
lifestyles. For example, dynamic pricing for health insurance. Why should a person always
pay the same fixed amount for years? With current technology we can measure if a
person’s health has improved or declined then cross-reference the data with their
insurance smart contract on the blockchain and adjust the premium in real time.
Blockchain helps achieve this whereas previously it would have been too expensive to do
so.
The future of banking will be a more fluid system of
different entities communicating with one another like a
neural network.
How do you envision the future of banking 10 years from now?
Unlike most, I don’t see banks being overthrown like the record industry. I see them
evolving. The future of banking will be a more fluid system of different entities
communicating with one another like a neural network. It will really be banking without
borders as multiple products, services and businesses will be connected seamlessly. With
everything connected, companies will have to better themselves by offering better
customer service and experiences.
Look at communication. Before going on a trip, I used to have to think about roaming
packages, getting cash for the local currency, etc. Now I just get on a flight from
Singapore to Spain and treat it like a domestic trip. I land and can pick up a SIM card at a
low price. I call anyone through WeChat, WhatsApp or FaceTime. I pay for everything
electronically. I don’t need to give the local number to anyone since we communicate
through apps. Sending money, signing off on waybills for international trade, insurance
for using car-sharing services will all happen in real-time without needing more than a
couple of minutes of planning.
Pavel Bains is an entrepreneur, futurist, designer and investor in exponential technologies. Besides being
CEO of Bluzelle Networks, Pavel is also an investor in FinTech startup Bench and virtual reality startup VR
Chat. Pavel is part of 500 Startups and contributes to Fast Company, Venture Beat, Forbes and The
Huffington Post.
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“

Working towards a world of many chains
Hi Brian, to start, can you explain what Hyperledger is?
The Hyperledger Project was founded in December 2015 as a collaborative effort created
to advance blockchain technology by identifying and addressing important features for a
cross-industry open standard for distributed ledgers that can transform the way business
transactions are conducted globally.
The beauty of cross-company and industry open source projects is that organisations
can share the unprofitable and unsexy work of building the libraries and standards, which
underlie systems. A shared code base also serves as an excellent way of concurrently
building a standard for coexisting on a blockchain.
What is the main interest of your members and the main goal of your organisation?
The joint goal of Hyperledger is to develop a common distributed ledger technology that
is shared, transparent and decentralised, which makes it ideal for enterprise applications
in finance and a myriad of other areas including retail, banking, manufacturing and the
Internet of Things. Designed for collaboration and with a strong focus on privacy,
confidentiality and auditability, Hyperledger allows anyone to create their own blockchain
shared ledger for their own company, industry or personal use case.
7
Brian Behlendorf
EXECUTIVE DIRECTOR,
HYPERLEDGER

Why is your model open source versus closed source? Are you building the platform
on a specific blockchain?
The Hyperledger Project envisions a world of many chains, some public like Bitcoin,
some private, some "unpermissioned" like Bitcoin, some "permissioned" like those you
will likely see in healthcare settings, at least initially. Hyperledger aims to provide tools for
communities to build their own chains, rather than driving everyone to one chain. Much
like the Apache web server project drove people to build their own websites, rather than
encouraging everyone to just use one big site.
What can you tell us about interoperability?
Interoperability is essential within a given blockchain - you all have to agree on a
consensus mechanism, a smart contract platform, and your membership model. Thus, it
can be hard to evolve these over time, as technologies mature and new ideas arise.
Furthermore, these chains don't all have to "talk" to each other, transactionally - an
application could perhaps post a message from one into another, creating a “hyperlink
between websites”, but still be from two very different kinds of chains.
What is important is to provide a common framework for
building these chains.. to help the blockchain business
ecosystem standardise and thrive.
What is important is to provide a common framework for building these chains - for
making these choices as much of a "run-time decision" as possible. This is comparable
to the way you can deploy Linux in very different kinds of computing hardware and
circumstances, but at its core is still the same software. This has benefits, in that it's
relatively easy to find someone with Linux development skills, and those skills are
portable to different environments. That's what we need to help the blockchain business
ecosystem standardise and thrive.
How far advanced is Hyperledger in its development processes?
The Hyperledger Project is among the fastest growing projects at The Linux Foundation
with an impressive membership base. We are also seeing rapid co-development on the
Hyperledger Fabric product, involving IBM, Digital Asset Holdings, and several other
corporate participants. This project just posted a "developer preview" release, a necessary
step on the path to an alpha, a beta, and finally a full release.
8
“

Could you shed some light on the debate between private blockchain that is able to
handle higher transaction volume vs public blockchain which is limited to lower
transaction volume while maintaining higher standards of security?
What is the long-term solution in your view? How are you allowing for private and
confidential transactions while maintaining the right level of security?
It's not so much a "debate" as a simple matter of physics. On a permissioned chain
(which could be public or private), you can use a simpler consensus mechanism (such as
PBFT), because you don't have to worry about "sybil attacks". Therefore you can set a
target transaction volume and size up the compute requirements of the nodes to meet
your desired transaction target. This is mandatory for certain use cases, such as stock
markets or other kinds of financial applications.
Security plays a role but is orthogonal to all of this - it may be a desirable property of a
private chain (which could only also be permissioned) that you can log more sensitive
information to it, but there's nothing inherent to the use of a blockchain that makes those
nodes more invulnerable to hacking and information disclosure. At the very least, though,
a blockchain (whether public or private) can provide a good means to ensure that a
cyberattack can't change data imperceptably, because they'd have to hack every node
and make that change all at the same time. So, a distributed ledger becomes a much
more trustworthy repository of data than a database or logfile kept at one company.
Where in the insurance industry do you think blockchain can make an imminent
material impact? What kind of implications do you see due to such changes?
Blockchain technology could transform the way people manage identities and personal
information, drive honesty and transparency and influence consumer perceptions of risk
that could change the way insurers support them.
Blockchain applications in insurance will likely start with digital identity systems and
management of personal data. An identity created within a blockchain would be
completely unique and offer a higher level of security that the insured party was who
they claim to be and offer a greater sense of online security in general. The reduced
administration costs and increased levels of security are both major benefits to
customers even if they are challenging for the current insurance model to handle.
We are seeing interest grow rapidly in Asia. How do you view Asia as an opportunity for
blockchain technology? How do you think it is different from more developed
markets? Where do you see the real opportunity for this region?
Financial institutions are hugely excited about blockchain technology all over the world
including Asia. Blockchain brings the promise of tracking and giving transparency to all
transactions and making them tamper-proof since individual transactions are not kept in
a single place but stored on computers globally. Blockchain can allow end users to save
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money on international ﬁnancial transactions, and move money around instantly and
securely. This could be a huge opportunity for Asian markets.
Brian Behlendorf is the Executive Director of the Hyperledger Project. Behlendorf was a primary developer
of the Apache Web server, the most popular web server software on the Internet, and a founding member
of the Apache Software Foundation. He has also served on the board of the Mozilla Foundation since
2003 and the Electronic Frontier Foundation since 2013. He was the founding CTO of CollabNet and CTO
of the World Economic Forum. Most recently, Behlendorf was a managing director at Mithril Capital
Management LLC, a global technology investment ﬁrm.
10

How close are we to T+0 with blockchain?
Oliver, how did you first encounter blockchain?
I first heard about blockchain in April 2014 when I met the entrepreneur Richard Olsen,
who among other things was the co-founder of Oanda. I was CIO at UBS at the time,
and Olsen came to us proposing to build an FX exchange on the Internet using a version
of the Bitcoin ledger. His idea was that you could greatly simplify processes and reduce
settlement to almost real time. This was new to us, but we ran a feasibility study and
quickly realised the power of the distributed ledger. That led to us putting more effort
into the topic.
What interests you about blockchain?
The blockchain has incredible potential and there are now countless use cases being
proposed for it. But to simplify things, I think we can look at it in terms of core benefits.
For example, the blockchain can facilitate decentralised transactions among many parties
over the Internet. Unlike today’s Internet, these are not instructions about transactions,
but the actual transactions themselves. That’s the essential difference. I think the
blockchain could also go a long way to reducing fraud and increasing trust in
transactions while also increasing security and, if done right, strengthening privacy.
11
Oliver Bussmann
FOUNDER & MANAGING
PARTNER, BUSSMANN
ADVISORY

Finally, the blockchain has the potential to greatly increase transparency and efficiency in
multi-party transactions.
Some call blockchain the “fourth industrial revolution” – how do you think blockchain
will change how business is done around the world?
It will fundamentally change business in many ways, most of which we probably can’t
imagine at the moment. It will mean new and more decentralised business models. This
will facilitate disintermediation in all sorts of markets, making the middle man obsolete in
many areas and dramatically simplify how we do business in financial services and other
industries. This simplification in turn will reduce costs. Transaction costs for many things
may well drop to near zero. That is game changing.
Do you think blockchain technology will ultimately be able to bypass today’s
centralised financial infrastructure? Or do you see it as an avenue to complement
centralised financial infrastructure?
I don’t think we are looking at a big bang scenario. Instead we’ll see a phased approach in
areas of the financial services industry starting with everything in the post-trade space to
know-your-customer applications to private placements in the IPO business. Over the
next five to ten years the scope will continue to get broader. That said, I am not sure that
banks will own these processes in the end. I don’t necessarily see a centralised system
coming out of this. I think it is likely that clients will ultimately own the assets on the
ledger, everything from financial assets to luxury goods through to anything that has a
value and can be described. This will all be on the ledger and the client will own the key.
That is the biggest change I can see.
Innovation has to be orchestrated. It has to be embraced
throughout an organisation and it has to be continuous.
Innovation is not a one-time event.
Which industries do you think are closest to implementing blockchain technology into
their operations?
Financial services was definitely the first industry that got impacted with the Bitcoin topic.
Due to the rather significant regulatory requirements in different jurisdictions, I am not
100% sure that financial services will be a front-runner over the short term when it comes
to blockchain. It can be that other industries, for example those related to the Internet of
Things or luxury goods or the energy grid or similar types of industries will likely be front-
running the development of blockchain applications.
12
“

Why is Asia an attractive market for blockchain companies?
The talent pool is huge. There are excellent, extremely well-educated people across the
leading nations, from India to China to Hong Kong and Singapore. In the financial
services industry you have massive talent pools particularly in the ASEAN region.
Singapore has one of the most progressive regulators when it comes to embracing
blockchain as a business development opportunity. They have created a sandbox
environment and have provided funds and expertise to act as a catalyst to bring
blockchain technology and knowledge sharing into the region. That’s because they
believe it will strengthen the competitive position of Singapore as a financial centre.
What do you think is the best way for corporates and banks to stay relevant in the
evolving financial systems?
The essential thing is to make innovation a part of the company DNA. Innovation has to
be orchestrated. It has to be embraced throughout the organisation, and it has to be a
continuous process. Innovation is not a one-time event.
How far are we from T+0 and do we want to get there?
I think because you have multiple parties involved, even if the technology is there, it will
still require changes to business processes, standards and regulation. It is hard to hazard a
guess how long it will take, but it will take a while. From my point of view however, we
have to get there. The real-time enterprise is the ultimate end game.
When do you think blockchain will become ‘scalable’ and be able to handle volume?
Over the next three to five years we are going to see selective implementation and
broader volumes. I think we will reach scale over that period.
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Singapore has one of the
most progressive
regulators when it comes
to embracing blockchain…
they believe it will
strengthen the
competitive position of
Singapore as a financial
centre.
”

The biggest issue right now [is that] the regulatory
environment around blockchain is simply not clear.
What should be the role of the central banks and governments in blockchain
adoption?
I think regulators have an important role to play in supporting the development of the
technology but above all in creating regulatory certainty around it. When regulators
embrace a new technology like blockchain, it typically has positive implications, for
example, for startups. And that is the biggest issue right now – the regulatory
environment around blockchain is simply not clear. I think regulators and central banks
also have a role in promoting business development and in being part of the ecosystem
that supports the learnings necessary to drive adoption. Some are doing this and some
are not. The regulators in Singapore and the UK for example have decided to approach it
in a collaborative way. They are keen to go through the learning curve, which is good
because their learnings will not only help support the technology, it will also translate into
policies, which will ultimately reduce uncertainty.
What do you think of the NASDAQ’s blockchain initiative with Chain? Is it something
that you foresee happening in Asia?
I think blockchain will above all disrupt intermediaries like stock exchanges and
custodians. From that perspective the early activities of NASDAQ and the Australian stock
exchange make absolute sense. They want to be involved in the early stages to
understand the benefits of the new technology as well as what kind of role they may play
in a distributed ledger environment.
Oliver T. Bussmann has gained a worldwide reputation as a technology thought leader and driver of large-
scale transformation at global organizations in the financial services and hi-tech industries. Previously as
Group Chief Information Officer (CIO) of UBS, Oliver successfully led a major IT transformation effort, and
established UBS as a pioneer in the development of blockchain for use in financial services. Now as the
founder of Bussmann Advisory, he helps C-suite executives and decision makers stay ahead of the digital
disruption curve.
14
“

Building a smart contracts platform
Hi Henrik, tell us, how did you first get involved with blockchain?
I’ve been a developer myself for over 25 years and it’s seldom that I see something truly
inventive and original. I was introduced to Bitcoin and blockchain in 2011 by Alex Mizrahi,
now the CTO of Chromaway. At first, I didn’t think it was a viable solution and dismissed
it. But about a year later, it was still around and when I started to look at it seriously, I
realised what a beautiful and impressive system it was.
Blockchain is a completely new way of thinking and building systems. It allows new
services to be built while enabling old ones to reach markets they previously couldn’t.
Specifically, it allows informational systems to work securely without a need for a trusted
third party and can thus enable new forms of business cooperation.
As an Economics graduate, I also find the game-theoretical fundamentals particularly
intriguing
What is ChromaWay?
ChromaWay builds tools that allow companies to use blockchains. Our products focus
on asset transfer and smart contracts.
15
Henrik Hjelte
CEO, CHROMAWAY

Can you describe the architecture of your platform?
Our Smart Contracts platform has three layers:
1. Logic layer: This is made up of a high-level contracting language
2. Storage layer: This is where the data of the contract is stored. This can be locally
at each actor, some cloud solution or a distributed system like Bittorrent/StorJ
etc.
3. Consensus layer: This is used to timestamp and keep track of the order and
integrity of the messages of the system. This can be Bitcoin, Ethereum or some
private blockchain.
We also have a public ledger platform based on coloured coins, for applications which
require asset transfer and no smart contracts. Additionally, we are working on a
framework which will combine smart contracts with a public ledger.
Why are you building your own platform? Is there a reason you’re only using existing
protocols for the 'stamping' of information (consensus layer) ?
We believe that today’s existing solutions aren’t adequate. They aren’t very scalable, and
don’t allow for private information in smart contracts. So we’ve built a system that utilises
the time stamping or “consensus” part of each blockchain and moves the storage and
logic to components outside of the blockchain.
[Blockchain] allows informational systems to work securely
without a need for a trusted third party and can thus enable
new forms of business cooperation.
What are the limitations of using Ethereum for all smart contracts?
The Ethereum Virtual Machine is able to perform arbitrary calculations and it allows
contracts to interact in arbitrary ways. It is very powerful in the sense it allows one to
implement contracts of arbitrary complexity in a fairly straightforward way, but it also has
drawbacks: contracts and, especially combinations of contracts, are hard to analyse with
regards to security and correctness. With our own smart contract language we strive to
do something that can be easily analysed by both humans and machines for security and
legal issues.
Other possible drawbacks:
• Public blockchains might be unsuitable to use for many of the business cases
due to concerns about a) high per-transaction fees; b) privacy issues (everyone
can see the contracts and the associated data); c) amendability in the case of a
faulty contract.
16
“

• Private blockchains based on Ethereum source code are not standardised;
several of them are experimental and might be based on questionable consensus
models. (Basically, there is no such thing as a private Ethereum blockchain and
there are a number of products with different features.)
• Even private Ethereum-based blockchains might have issues with privacy, as
some require multiple unrelated customers to use the same blockchain.
Who are your current customers and which use cases are you currently exploring?
We have had the pleasure of working with a range of clients so far. The first one being
LHV Bank, the biggest domestic bank in Estonia, where we built a retail payment
application for consumers to send payments to other consumers or merchants through
their phone. We have also worked with Funderbeam, another company in Estonia, which
allows startups to raise money through an equity crowdfunding platform. The shares in
the investment syndicates are then registered on the blockchain which allows them to be
transferred and traded.
Additionally, we are working with the Swedish Land Registry, Telia and Kairos Futures to
model property sales using our smart contracts technology, showing what the future of
purchasing property could look like. This is an ongoing project, moving into phase two in
partnership and with financing from Landshypotek Bank, SBAB Bank, Telia.
Why work with banks and insurance companies?
We believe that banks, insurance companies and other larger institutions are the perfect
partners for us. They have the domain expertise, the resources and the network to make
the necessary changes. It is hard to disrupt such a heavily regulated industry such as
finance; it is easier to work with parties in the system and push for the change from the
inside out. We believe that banks might be some of the biggest benefactors of
blockchain technology if they are just willing to embrace it, as it will lead to a better and
cheaper service for the end consumer.
Henrik Hjelte is the CEO of ChromaWay, one of the earliest blockchain companies in the world. Four years
ago their CTO created the first way to issue assets on the blockchain. Two years ago ChromaWay did their
first project around mobile payments using this technology for LHV bank in Estonia. Recently, the
company has developed a smart contract system for selling houses with the Swedish Land Registry.
ChromaWay has won international awards and has participated in accelerators from Singapore and Silicon
Valley. Mr Hjelte has been coding for almost 30 years, has a degree in Economics but is most passionate
about entrepreneurial adventures. 
17

Investing in blockchain
 
Hi Antony. Can you tell us, what caught your attention in the blockchain space this
year?
This year we have seen a real divide in the companies operating in the blockchain space
– they are either aligning to uses for existing industry participants, or attempting to create
a market for disruptive uses. This year, I joined R3, an innovation firm building the next
generation of financial services technology. Having previously worked in banking
technology, I can see that there is a dire need to use technology properly to reduce risks,
drive down costs, and potentially create new revenue streams.
What type of blockchain technologies would you bet on as an investor?
One of the key decisions you need to make from an investment standpoint is whether
you want to invest in cryptocurrencies and public blockchain infrastructure, or
companies that focus on distributed ledger technologies for industry use.
If you want to bet on cryptocurrencies and public blockchains, there are three ways you
can do it:
1. The most straightforward way is to buy the cryptocurrency itself (e.g. Bitcoin,
Ethereum, Zcash), and hope that the price goes up and you can sell it for a profit.
18
Antony Lewis
DIRECTOR OF RESEARCH,
R3 SINGAPORE

That is, before you get hacked, before the exchange gets hacked, or before you
lose your keys. The price of these tokens are driven purely by supply and
demand, much of which is based on news and rumours on chat forums which
means they are quite volatile.
2. Or you can participate in “initial coin offerings” which are digital tokens issued by
a startup as part of a fundraise effort. This is an unregulated grey market and
sometimes the prospectuses are no more than an internet landing page. The idea
is that the price of the tokens goes up if the company does well, but these are
not equities and token holders get none of the protection that equity holders get.
Thus, buyer beware!
3. Finally, you can buy equity in startups and companies that are creating solutions
in this space.
If you want to invest in those companies building private ledgers for industry, it is
important to understand the problems that these companies are trying to solve. Stick to
an industry you understand and don’t be dazzled or confused by arcane technical
concepts. Market entry, especially in finance, is difficult without strong credibility and
takes time, so companies with cashflow or a good runway are probably a better bet.
Latest distributed ledgers such as R3’s Corda… don’t use a
blockchain at all! Instead the focus is on interoperability
between the new technologies being created.
What is (are) the solution(s) to the current limitations of the blockchain technology?
Public blockchains and private distributed ledgers solve different problems, and as such,
are different technical solutions with different limitations.
Scalability is one relevant limitation. Currently Bitcoin’s network can only process about
three transactions per second. There are several proposed upgrades and workarounds
that seem to have varying levels of support from the community. An example of a
solution is off-chain payment channels, also known as lightning networks, which seem to
be gaining traction.
Another limitation is the privacy and traceability of coins – ‘once I know your account
number I can see every transaction that has ever occurred in it’. There are some
interesting solutions coming from the field of cryptography, loosely called “Zero
Knowledge Proofs”, where you can demonstrate something about some data without
revealing the data itself. The cryptocurrency Zcash uses one type of experimental zero
knowledge proof called a “SNARK” to achieve transaction privacy.
19
“

For industry use, data privacy and confidentiality challenges are even more relevant,
especially considering that commercial competitors may participate in the same
network. As a result, the latest distributed ledgers such as R3’s Corda, which are built
specifically for the needs of regulated industry, don’t use a blockchain at all! Instead, the
focus is on interoperability between the new technologies being created.
Antony is Director of Research at R3, based in Singapore. He was an FX spot trader and market maker at
Barclays Capital, and a FX systems technologist at Credit Suisse. In 2013-15 he was the Business
Development Director for Asia at itBit, the first bitcoin exchange to get a Trust licence in the US, and has
consulted banks, law firms, education, and the public sector on blockchains and cryptocurrencies as an
independent consultant.
Read more insights from Antony on his blog, https://bitsonblocks.net/.
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Integrating blockchain in a financial institution
Thanks for joining us, Altona. How do you see blockchain technology transforming the
way OCBC operates in the next five years?
The excitement surrounding blockchain technology today is such that almost every
major financial institution is now exploring blockchain, either as part of an industry
consortia or as an individual entity.
Meanwhile, as the allure of distributed ledger technologies continues to mount, the
reality on the ground and at a more basic level is quite different. We can unequivocally
say that the digital asset management ecosystem will look vastly different as a result of
continuing technological advances in multiple domains. But in all likelihood, blockchain
innovations could be the most transformative of those advances, and we will likely see a
number of real-life applications of blockchain applied to digital assets, including:
• Shares and financial securities
• Smart property
• Tie to a fiat currency
• Local community money
• Coupons
21
Altona Widjaja
VP FINTECH AND INNOVATION
GROUP (THE OPEN VAULT)
OCBC BANK

• Digital collectibles
• Access and subscription to certain resources.
Private, permissioned chains amongst a finite set of counterparties and clients could
become commonplace, with dedicated processors running in a P2P model on large
bank networks and operations capability potentially facilitating multiple private chains to
manage a range of asset lifecycle management problems.
Digital asset management could also leverage security properties of blockchain, which
include:
• Impossibility of counterfeit
• Immutability
• Disintermediation and ease of transfer
• Transparency and ease of auditing
• No overhead related to transaction processing
• Network effect brought by the unified infrastructure for multiple types of tokens
What applications are you looking into? Are you planning on implementing these
technologies in collaboration with other banks in the region?
Our current interests lie in three folds of application:
1. KYC/ AML
2. Trade Finance/Smart Contract
3. Payments
We believe that blockchain application implementation makes more sense with other
institutions also joining the “consensus” network. OCBC is always open to collaborating
with other banks, not just in the region but with financial institutions elsewhere in the
world.
What are the main challenges to adopting blockchain for a bank in Singapore?
The challenges of blockchain adoption are not unique to Singapore but have global
reach. For us, the biggest problems are:
1. Scalability
We have noticed that (in general perception as well) the scalability of the blockchain
has yet to be proven.
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• In a public blockchain like Bitcoin there are thousands of nodes storing copies of
blockchain content, many of which are run by hobbyists, so there will always be
a low limit on transaction volumes if the network is to remain meaningfully
decentralised.
• In private blockchains (a.k.a. distributed ledgers) the issue is less burning because
the only nodes running are those who have a direct interest in the successful
processing of the transactions. But of course it is still costlier than a single
centralised database.
• Either way, we don't think blockchain is well suited for high frequency trading
because the asynchronous, ad-hoc, peer-to-peer nature of the network of
blockchain nodes introduces delays that HFT cannot realistically tolerate. Or at
least, this will not be one of its early applications.
As a separate point, note also the notion of "pruning" whereby most nodes on a
blockchain don't store the full history of all transactions, but just an ongoing verified
representation of the current state. This can completely solve the scaling problem,
so long as you're comfortable with there only being a few copies of the transaction
history (which still cannot be modified because then it would disagree with the
current blockchain state).
The technology itself largely depends on a consensus model, and that demands a
factor of trust between all stakeholders.
2. Regulation
We have yet to determine how blockchain fits in with existing regulations and
legislation. A considerable number of aspects of law will need to be reinterpreted or
changed through primary legislation. These issues include the legal definition of the
finality of settlement which presupposes existing market processes and central data
sources held at the CSD. Similarly, there currently exist geographic territorial
requirements concerning where data is physically maintained as golden source, a
concept that does not fit with copies of the ledger being distributed to nodes on a
global basis.
The world of financial transactions survives on one
keyword: “trust”.
Which makes more sense to integrate into OCBC – private or public blockchain?
As always, it will depend on the application. We believe that a private or hybrid chain
might be more suitable for application in financial services and we are already exploring
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use cases. This is due to the nature of information stored and the speed advantage over
public blockchain that is required.
What are your major concerns and where do you foresee the biggest opportunity?
Of major concern is the adaptability with legacy system and processes. Most banks are
massively invested in their financial processing system infrastructures. These systems -
often 15 or 20 years old – power transactions between the world’s major businesses and
governments; trying to overhaul them altogether is a tall order attached with huge risk.
We believe that it will take some time and a step up approach to solve the problem and
garner support from major players to adopt the new platform.
The biggest opportunity we see is the unique chance to amalgamate different standards:
Interoperability. The world of financial transactions survives on one keyword: “trust”. Take
for example the 2008 financial crisis, at the heart perhaps the most critical element was a
lack of visibility into the counterparty credit exposure of one major financial institution to
another. Probably the most glaring omission that needed to be addressed was that lack
of visibility, and here we are in 2016, and we still don’t have it. Blockchain and its growing
influence can potentially answer this problem.
Altona currently runs The Open Vault, the Fintech and Innovation arm of OCBC Group. He oversees the
development of the Fintech acceleration programme, Fintech solution development and Innovation
culture building for OCBC Group. With more than 9 years of experience in Financial Services Technology,
Consumer Banking and Strategy both locally and regionally. Altona is passionate about technology’s role
as an enabler and a challenger of the status quo. He holds a Masters in Technology (Knowledge
Engineering) and a Bachelor in Computer Engineering.
After launching a FinTech accelerator, The Open Vault at OCBC, that resulted in 7 proof of concepts and 3
live customer pilots, OCBC is currently investigating how blockchain technology can be implemented
within its core businesses.
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