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BLOCKCHAIN TECHNOLOGY:
HOW WILL IT AFFECT INVESTMENT MANAGEMENT?
WILLIAM MOUGAYAR
AUTHOR, THE BUSINESS BLOCKCHAIN
CRYPTOGRAPHY
SCIENCE
SOFTWARE
ENGINEERING
GAME THEORY
BYZANTINE’S GENERALS PROBLEM
SOFTWARE
ENGINEERING
CRYPTOGRAPHY
SCIENCE
GAME
THEORY
EVERYTHING TODAY REQUIRES A DATABASE SYNCHRONIZATION
Owns Database A
Confirms A has at least $5
Bank A
Owns Database B
Con...
THE BLOCKCHAIN ENABLES P2P TRANSACTIONS
Initiates transfer
from their wallet
User AA
Receives funds in
wallet
User BB
BLOC...
SHARED DOCUMENTS ANALOGY
3 DIMENSIONS FOR VIEWING THE BLOCKCHAIN
▸ Back-end database that maintains a
Distributed Ledger.
▸ Exchange Network for mo...
MANY FACETS TO THE BLOCKCHAIN
1.  Cryptocurrency
2.  Computing Infrastructure
3.  Transaction Platform
4.  Decentralized D...
BLOCKCHAINS, LIKE THE
WEB, NEED THE INTERNET
I N T E R N E T
WORLD WIDE WEB BLOCKCHAINS
©2016 William Mougayar
‣ In startup fashion, most attacks
aren’t head-on, start small & look
harmless at first sights, therefore
are ignored
‣ So,...
BLOCKCHAIN IN FINANCIAL SERVICES EVOLUTION
DEFINING TECHNOLOGY ERAS
Self
Publishing
E-
Commerce
Social
Interactions
IT Supremacy Internet Years
Personal
Communicatio...
PROOFS-AS-A-BUSINESS
THE NEW WORLD OF CRYPTOCURRENCIES (COINMARKETCAP.COM)
OPEN BAZAAR: DECENTRALIZED P2P COMMERCE
“THE BUYING AND SELLING WORKS FLAWLESSLY, I'M
VERY IMPRESSED. I'VE MADE OVER TWENTY PURCHASES
AND THE TOTAL FEES WERE LESS...
BLOCKCHAIN AND REGULATION
‣ Risk is regulatory confusion
‣ New regulations needed, e.g. record keeping
‣ Where do you inse...
INNOVATION POTENTIAL FOR BLOCKCHAIN
UNREGULATED
ENVIRONMENTS
REGULATED
ENVIRONMENTS
‣ FSI’s are undertaking a variety of activities:
‣ Poking at startups and trying them
‣ Planning their own blockchain init...
BLOCKCHAIN IS 90% GOVERNANCE AND
BUSINESS MODELS.
THE OTHER 50% IS TECHNICAL.
THE NEXT PHASE OF THE BLOCKCHAIN WILL BE DRIVEN BY BUSINESS
Who will be
the next
Google of the
blockchain?
Who will be the
next Amazon
of the
blockchain?
Who will be
the next ____
of the
blockchain?
The first large
bank to accept
cryptocurrency?
Crossing $1B
assets traded on
blockchains?
FINANCIAL SERVICES
INTERESTING USE CASES ARE EMERGING
‣ eTRS (ConsenSys, Microsoft, IPFS), Clearmatics, DCN for OTC deriva...
VENTURE CAPITAL IS CHANGING
WHAT WE NEED TO SEE
‣ Regulatory sandboxes (WFE, CFTC, IIROC)
‣ Blockchain record keeping acceptance
‣ Emergence of new cl...
IMPLICATIONS - WHAT’S NEXT?
‣  Re-examine, Re-think your strategies
‣  New Asset classes, New funding methods (ICO)
‣  New...
BECOME PART OF CONVERSATIONS
THANK YOU
WILLIAM MOUGAYAR
AUTHOR, THE BUSINESS BLOCKCHAIN
WMOUGAYAR@GMAIL.COM
416-648-7010
@WMOUGAYAR
(C) 2016, ALL RIGHT...
Blockchain Technology: How Will it Affect Investment Management?
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Blockchain Technology: How Will it Affect Investment Management?

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William Mougayar's presentation at the Montebello Institutional Dialogue Conference, Oct 17 2016.

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Blockchain Technology: How Will it Affect Investment Management?

  1. 1. BLOCKCHAIN TECHNOLOGY: HOW WILL IT AFFECT INVESTMENT MANAGEMENT? WILLIAM MOUGAYAR AUTHOR, THE BUSINESS BLOCKCHAIN
  2. 2. CRYPTOGRAPHY SCIENCE
  3. 3. SOFTWARE ENGINEERING
  4. 4. GAME THEORY
  5. 5. BYZANTINE’S GENERALS PROBLEM
  6. 6. SOFTWARE ENGINEERING CRYPTOGRAPHY SCIENCE GAME THEORY
  7. 7. EVERYTHING TODAY REQUIRES A DATABASE SYNCHRONIZATION Owns Database A Confirms A has at least $5 Bank A Owns Database B Confirms BB can receive $5 Bank B Customer AA wants to transfer $5 to person BB SWIFT Clearing House © 2016 William Mougayar Escrows Custodians Trusted Parties
  8. 8. THE BLOCKCHAIN ENABLES P2P TRANSACTIONS Initiates transfer from their wallet User AA Receives funds in wallet User BB BLOCKCHAIN © 2016 William Mougayar
  9. 9. SHARED DOCUMENTS ANALOGY
  10. 10. 3 DIMENSIONS FOR VIEWING THE BLOCKCHAIN ▸ Back-end database that maintains a Distributed Ledger. ▸ Exchange Network for moving value between peers. ▸ Transaction Validation mechanism, not requiring intermediary assistance. TECHNICAL BUSINESS LEGAL
  11. 11. MANY FACETS TO THE BLOCKCHAIN 1.  Cryptocurrency 2.  Computing Infrastructure 3.  Transaction Platform 4.  Decentralized Database 5.  Distributed Accounting Ledger 6.  Development Platform 7.  Open Source Software 8.  Financial Services Marketplace 9.  Peer-to-Peer Network/Marketplace 10. Trust Services Layer
  12. 12. BLOCKCHAINS, LIKE THE WEB, NEED THE INTERNET I N T E R N E T WORLD WIDE WEB BLOCKCHAINS ©2016 William Mougayar
  13. 13. ‣ In startup fashion, most attacks aren’t head-on, start small & look harmless at first sights, therefore are ignored ‣ So, the banks didn’t feel FinTech initially, because it crept up FINTECH HISTORY MIGHT REPEAT ITSELF
  14. 14. BLOCKCHAIN IN FINANCIAL SERVICES EVOLUTION
  15. 15. DEFINING TECHNOLOGY ERAS Self Publishing E- Commerce Social Interactions IT Supremacy Internet Years Personal Communications Blockchain Promise 1994 2015 Data computation Database applications Transaction processing Business Intelligence Global operations Enabling Decentralization of Trust Value Flow without Intermediaries
  16. 16. PROOFS-AS-A-BUSINESS
  17. 17. THE NEW WORLD OF CRYPTOCURRENCIES (COINMARKETCAP.COM)
  18. 18. OPEN BAZAAR: DECENTRALIZED P2P COMMERCE
  19. 19. “THE BUYING AND SELLING WORKS FLAWLESSLY, I'M VERY IMPRESSED. I'VE MADE OVER TWENTY PURCHASES AND THE TOTAL FEES WERE LESS THAN $1.40 FOR ALL TWENTY PURCHASES AND SALES. THAT'S GREAT.” OpenBazaar User
  20. 20. BLOCKCHAIN AND REGULATION ‣ Risk is regulatory confusion ‣ New regulations needed, e.g. record keeping ‣ Where do you insert the blockchain? ‣ Difference between blockchain and cryptographic ledgers ‣ Risk is centralization
  21. 21. INNOVATION POTENTIAL FOR BLOCKCHAIN UNREGULATED ENVIRONMENTS REGULATED ENVIRONMENTS
  22. 22. ‣ FSI’s are undertaking a variety of activities: ‣ Poking at startups and trying them ‣ Planning their own blockchain initiatives ‣ Many have aligned with R3, DAH or Chain as their main partners ‣ For most of them, the attention is on cost savings and process improvements, not pure innovation (bottom line) ‣ Few are thinking strategically about how they could innovate outside of the regulatory boxes WHAT IS HAPPENING IN FINANCIAL SERVICES?
  23. 23. BLOCKCHAIN IS 90% GOVERNANCE AND BUSINESS MODELS. THE OTHER 50% IS TECHNICAL.
  24. 24. THE NEXT PHASE OF THE BLOCKCHAIN WILL BE DRIVEN BY BUSINESS
  25. 25. Who will be the next Google of the blockchain?
  26. 26. Who will be the next Amazon of the blockchain?
  27. 27. Who will be the next ____ of the blockchain?
  28. 28. The first large bank to accept cryptocurrency?
  29. 29. Crossing $1B assets traded on blockchains?
  30. 30. FINANCIAL SERVICES INTERESTING USE CASES ARE EMERGING ‣ eTRS (ConsenSys, Microsoft, IPFS), Clearmatics, DCN for OTC derivatives, Cambridge Blockchain catastrophe bond counterparty validation ‣ Japan: Securities Insurance, Corporate Actions (Dividend/Stock Splits, Ownership Registry, Trade Reconciliation, Cash Payments, etc.) ‣ Payments Canada: Wholesale payments ‣ Syndicated Loans Test with R3 Banks ‣ Barclays UK: Letter of credit 100K test GOVERNMENT ‣ Delaware, Singapore, Estonia, Ukraine, Georgia, Ghana, UK, Sweden. ENERGY, HEALTHCARE, MANUFACTURING, INTERNET OF THINGS.
  31. 31. VENTURE CAPITAL IS CHANGING
  32. 32. WHAT WE NEED TO SEE ‣ Regulatory sandboxes (WFE, CFTC, IIROC) ‣ Blockchain record keeping acceptance ‣ Emergence of new clearing networks ‣ Identity on the blockchain ‣ Documented benefits (costs, speed, risk, visibility) ‣ Intermediaries that re-think their roles
  33. 33. IMPLICATIONS - WHAT’S NEXT? ‣  Re-examine, Re-think your strategies ‣  New Asset classes, New funding methods (ICO) ‣  New clearing & trading networks affecting buy/sell-side ‣  Private Blockchains activity ‣  Regulatory innovation ‣  Regulators as a node on network, not as central gatekeepers
  34. 34. BECOME PART OF CONVERSATIONS
  35. 35. THANK YOU WILLIAM MOUGAYAR AUTHOR, THE BUSINESS BLOCKCHAIN WMOUGAYAR@GMAIL.COM 416-648-7010 @WMOUGAYAR (C) 2016, ALL RIGHTS RESERVED.

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