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BLOCKCHAIN &
CRYPTO
A STUDY ON THE IMPACT OF
BLOCKCHAIN ON THE
FINANCIAL INDUSTRY
ABOUT ME
“INNOVATION AS A
RELIGION”
HYPERTRENDS GLOBAL INC.
THE BLOCKCHAIN
WILL DO TO THE
FINANCIAL
SYSTEM WHAT
THE INTERNET DID
TO MEDIA.
- Harvard Business Review
A TRIP DOWN
INTERNET’S
MEMORY LANE…
• DoD and Universities.
• Core aim to build a “network”.
• Open Architecture – HTTP, TCP/IP
• Every layer of the Internet
unlocked decades of technology
innovation.
• Commercial Interest after
Internet’s killer application ‘Email’
(SMTP) was revealed to the
masses.
BLOCKCHAIN
TECHNOLOGY
• Open, De-centralized
• Permission-less, Trustless
• Based on Protocols at every
level
• Will allow interoperability as
multiple Blockchain networks
evolve.
• Massively scalable
BITCOIN -
BLOCKCHAIN’S
KILLER
APPLICATION
HOW IT ALL
BEGAN
2008
FINANCIAL
CRISIS
SATOSHI NAKAMOTO
Bitcoin Whitepaper - OCT 2008
HOW DOES IT WORK
Candidate Transaction
Miners
Validate
Transaction
Put it on Blockchain
I paid Anup $5
Alice has
Bitcoins
Miner gets
rewarded
BITCOIN FEATURES
• Runs on top of the Blockchain
• Peer-to-Peer
• HARD CAP: 21 MILLION
• New Production through code
• Network checks for compliance
• Resistant to attacks, Robust Ecosystem
• Real Value – very much like gold
THE BIRTH OF
BLOCKCHAIN
INNOVATION
SO WHAT IS A BLOCKCHAIN?
Chain of Blocks
Each containing information
What makes it so special?
Once You Write Data To It, It’s Impossible To Change It
HASH
• Given the same input, the output will
always be the same.
ANUP
f689144ae4268455a
0314ee1016ba13e1
2fb037e772840a6eb
e60bc7a9b77f26
SHA256 HASH
790688e8a6749767b93
940076e2180a073b3ab
6cbb934e4441ce3ca28
93e4bb4
ANUP,
SHA256 HASH
EXAMPLE HASH
ae3172b7a0adb1165c4ef50ae95d647b6f2862a3e18e
6bfdfd1fad72bb855fe9
DECLARATION OF INDEPENDENCE
BLOCK CONTENTS
Data (e.g.: “Alice spent $2”)
Hash Of Data (e.g.: 121212aefb343d)
Hash Of Previous Block
EXAMPLE BLOCKCHAIN
Hash:
111
Prev. Hash:
0
Genesis Block
Hash:
222
Prev. Hash:
111
Alice has $10
Hash:
333
Prev. Hash:
222
Alice gave Bob $2
EXAMPLE OF TAMPERING
Hash:
222 232
Prev. Hash:
111
Alice has $15
222
Hash:
333
Prev. Hash:X
Hash:
111
Prev. Hash:
0
Genesis Block Alice gave Bob $2
DECENTRALIZED BY NATURE
BLOCKCHAIN PROPERTIES
• Distributed – Everyone has a copy of the same database. Append-Only.
• Global Singleton – Large Computer where everyone can execute code
(through Smart Contracts).
• Accessible - Anyone can download and participate.
• Verifiable – Every transaction can be verified
• Unstoppable – No single entity can prevent use
PROMINENT BLOCKCHAINS
ETHEREUM
• Open Source
• Public, Permission-less
• Smart Contracts
• Turing Complete, EVM
• BYO Crypto
• Open Source
• Public, Permission-less
• High Throughput
• Scalable
• Highly Reliable
• Open Source
• Linux Foundation
• Permissioned
• Tech Framework
• No Cryptocurrency
CRYPTOCURRENCIES
ARE NOTHING BUT
‘DIGITAL CASH’
TOKENS ON THE
BLOCKCHAIN
CRYPTOCURRENCIES
• Ethereum has Ether (ETH)
• Bitcoin Blockchain has Bitcoin
(BTC)
• Stellar has Lumens (XLM)
• Dragonchain has DRGN
“You can build
your own
Token on
Ethereum in
minutes.”
THE RISE OF CRYPTOCURRENCIES
STEEM COIN - $59M paid in rewards for Social
Media Content
Earn money by hosting files on unused disk space on your
computer.
Allows banks a reliable, on-demand option to
source liquidity for cross-border payments.
TOKENIZATION – THE FUTURE IS NEAR
“Democratizing ownership of assets on the Blockchain”
“Imagine paying for
Starbucks coffee with
your airline miles”
“Imagine buying Gold
without the hassle of
attaining physical
Gold.”
“Imagine owning a
small part of a rare
work of art.”
TOKENIZATION –
FEATURES
• Conversion of an asset into a
“Token” that can be recorded and
transacted on the Blockchain.
• Physical and Intangible Assets.
• Fungible and Non-Fungible Assets
• Every Blockchain is powered by
“Tokens” (i.e. coins)
• Blockchain popularity propels the
value of the coin.
• ICOs were a classic example of
Tokenization.
BLOCKCHAIN IS
TAKING OVER THE
WORLD
SECURITY TOKENS
Security Token is an actual
financial security, meaning
shares or equity in
traditional assets, startups,
venture funds and even
real estate.
NON-FUNGIBLE
TOKENS
STABLE COINS
• Volatility is not good for
average investors
• Need a way to peg crypto
coin value to fiat currency
or a portfolio of
cryptocurrencies.
BLOCKCHAIN
AND BANKING
INFLUENCE ON BANKING – IDENTITY SOLUTIONS
KYC INFORMATION
CRYPTO BEER
BINANCE BANKING
• World’s largest Crypto
Exchange
• World’s first Decentralized
Bank
• Ownership structure based on
tokenized equity products
• 5% Stake in Founders Bank at
$155M Pre-Investment
Valuation
ASIA RISING
• Hong Kong’s Monetary
Authority will launch own
Blockchain with 21 banks.
• Singapore’s Global E-Trade
Services launches Open
Trade Blockchain (OTB)
connecting China’s Silk
Route with ASEAN
• 13M Transactions – Gross
Merchant Value (GMV) of
$400B for first half of 2018
ALL EYES ON USA
• BitPay receives a virtual
currency license from NY
Dept of Financial Services.
• AmEx wants to put proof of
transaction on Blockchain
• You will be able to unlock a
hotel door with your card
• Mastercard wins patent for
Crypto payments
JP MORGAN LEADING THE WAY
“The hope among Quorum’s developers is that
blockchain can solve some of banks’ most
intractable problems by replacing a web of
connected databases with a single, shared,
immutable record of transactions. The problems
targeted include long and expensive settlement
times, system breakdowns and lack of clarity
about risk exposure.”
IBM – HYPERLEDGER – BANK GUARANTEES FOR
COMMERCIAL LEASING
“Rather than rely on a paper
instrument, the rules to ensure
the validity and integrity of a
guarantee were instead codified
and built into the operation of a
shared ledger.”
BUY SIDE OPTIMIZATION FOR ASSET MANAGEMENT
• Cost Savings and Identifying new sources of revenue
• Embedded and shared KYC and AML checks
• Automation of complex asset life-cycles through ‘smart contracts’
• Direct reporting access for Regulators and Clients
• Acceleration of the post-trade process
• Near instantaneous settlement for funding transactions
• Automated, peer-to-peer collateral management
• Peer-to-peer distribution, linking fund manufacturers directly to their end
clients opening up new revenue sources
CAPITAL MARKETS & BLOCKCHAIN
HURDLES
• Scalability – Hard work
being done
• Regulation and
Legislation
• Operational Risks –
Transition Risks
• Governance
HOW TO EMBRACE
THE FUTURE?
• Build Concrete Proof-of-Concepts
• Challenge Service Providers
• Quantify Cost Savings
• Invest/Form Start-ups
• Narrative for regulators
THANK YOU
• @anupmarwadi
• https://www.hypertrends.com
• anup@hypertrends.com

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Blockchain and Banking

  • 1. BLOCKCHAIN & CRYPTO A STUDY ON THE IMPACT OF BLOCKCHAIN ON THE FINANCIAL INDUSTRY
  • 2. ABOUT ME “INNOVATION AS A RELIGION” HYPERTRENDS GLOBAL INC.
  • 3. THE BLOCKCHAIN WILL DO TO THE FINANCIAL SYSTEM WHAT THE INTERNET DID TO MEDIA. - Harvard Business Review
  • 4. A TRIP DOWN INTERNET’S MEMORY LANE… • DoD and Universities. • Core aim to build a “network”. • Open Architecture – HTTP, TCP/IP • Every layer of the Internet unlocked decades of technology innovation. • Commercial Interest after Internet’s killer application ‘Email’ (SMTP) was revealed to the masses.
  • 5. BLOCKCHAIN TECHNOLOGY • Open, De-centralized • Permission-less, Trustless • Based on Protocols at every level • Will allow interoperability as multiple Blockchain networks evolve. • Massively scalable
  • 10. HOW DOES IT WORK Candidate Transaction Miners Validate Transaction Put it on Blockchain I paid Anup $5 Alice has Bitcoins Miner gets rewarded
  • 11. BITCOIN FEATURES • Runs on top of the Blockchain • Peer-to-Peer • HARD CAP: 21 MILLION • New Production through code • Network checks for compliance • Resistant to attacks, Robust Ecosystem • Real Value – very much like gold
  • 13. SO WHAT IS A BLOCKCHAIN? Chain of Blocks Each containing information What makes it so special? Once You Write Data To It, It’s Impossible To Change It
  • 14. HASH • Given the same input, the output will always be the same. ANUP f689144ae4268455a 0314ee1016ba13e1 2fb037e772840a6eb e60bc7a9b77f26 SHA256 HASH 790688e8a6749767b93 940076e2180a073b3ab 6cbb934e4441ce3ca28 93e4bb4 ANUP, SHA256 HASH
  • 16. BLOCK CONTENTS Data (e.g.: “Alice spent $2”) Hash Of Data (e.g.: 121212aefb343d) Hash Of Previous Block
  • 17. EXAMPLE BLOCKCHAIN Hash: 111 Prev. Hash: 0 Genesis Block Hash: 222 Prev. Hash: 111 Alice has $10 Hash: 333 Prev. Hash: 222 Alice gave Bob $2
  • 18. EXAMPLE OF TAMPERING Hash: 222 232 Prev. Hash: 111 Alice has $15 222 Hash: 333 Prev. Hash:X Hash: 111 Prev. Hash: 0 Genesis Block Alice gave Bob $2
  • 20. BLOCKCHAIN PROPERTIES • Distributed – Everyone has a copy of the same database. Append-Only. • Global Singleton – Large Computer where everyone can execute code (through Smart Contracts). • Accessible - Anyone can download and participate. • Verifiable – Every transaction can be verified • Unstoppable – No single entity can prevent use
  • 21. PROMINENT BLOCKCHAINS ETHEREUM • Open Source • Public, Permission-less • Smart Contracts • Turing Complete, EVM • BYO Crypto • Open Source • Public, Permission-less • High Throughput • Scalable • Highly Reliable • Open Source • Linux Foundation • Permissioned • Tech Framework • No Cryptocurrency
  • 22. CRYPTOCURRENCIES ARE NOTHING BUT ‘DIGITAL CASH’ TOKENS ON THE BLOCKCHAIN
  • 23. CRYPTOCURRENCIES • Ethereum has Ether (ETH) • Bitcoin Blockchain has Bitcoin (BTC) • Stellar has Lumens (XLM) • Dragonchain has DRGN “You can build your own Token on Ethereum in minutes.”
  • 24. THE RISE OF CRYPTOCURRENCIES STEEM COIN - $59M paid in rewards for Social Media Content Earn money by hosting files on unused disk space on your computer. Allows banks a reliable, on-demand option to source liquidity for cross-border payments.
  • 25. TOKENIZATION – THE FUTURE IS NEAR “Democratizing ownership of assets on the Blockchain” “Imagine paying for Starbucks coffee with your airline miles” “Imagine buying Gold without the hassle of attaining physical Gold.” “Imagine owning a small part of a rare work of art.”
  • 26. TOKENIZATION – FEATURES • Conversion of an asset into a “Token” that can be recorded and transacted on the Blockchain. • Physical and Intangible Assets. • Fungible and Non-Fungible Assets • Every Blockchain is powered by “Tokens” (i.e. coins) • Blockchain popularity propels the value of the coin. • ICOs were a classic example of Tokenization.
  • 28. SECURITY TOKENS Security Token is an actual financial security, meaning shares or equity in traditional assets, startups, venture funds and even real estate.
  • 30. STABLE COINS • Volatility is not good for average investors • Need a way to peg crypto coin value to fiat currency or a portfolio of cryptocurrencies.
  • 32. INFLUENCE ON BANKING – IDENTITY SOLUTIONS KYC INFORMATION
  • 34. BINANCE BANKING • World’s largest Crypto Exchange • World’s first Decentralized Bank • Ownership structure based on tokenized equity products • 5% Stake in Founders Bank at $155M Pre-Investment Valuation
  • 35. ASIA RISING • Hong Kong’s Monetary Authority will launch own Blockchain with 21 banks. • Singapore’s Global E-Trade Services launches Open Trade Blockchain (OTB) connecting China’s Silk Route with ASEAN • 13M Transactions – Gross Merchant Value (GMV) of $400B for first half of 2018
  • 36. ALL EYES ON USA • BitPay receives a virtual currency license from NY Dept of Financial Services. • AmEx wants to put proof of transaction on Blockchain • You will be able to unlock a hotel door with your card • Mastercard wins patent for Crypto payments
  • 37. JP MORGAN LEADING THE WAY “The hope among Quorum’s developers is that blockchain can solve some of banks’ most intractable problems by replacing a web of connected databases with a single, shared, immutable record of transactions. The problems targeted include long and expensive settlement times, system breakdowns and lack of clarity about risk exposure.”
  • 38. IBM – HYPERLEDGER – BANK GUARANTEES FOR COMMERCIAL LEASING “Rather than rely on a paper instrument, the rules to ensure the validity and integrity of a guarantee were instead codified and built into the operation of a shared ledger.”
  • 39. BUY SIDE OPTIMIZATION FOR ASSET MANAGEMENT • Cost Savings and Identifying new sources of revenue • Embedded and shared KYC and AML checks • Automation of complex asset life-cycles through ‘smart contracts’ • Direct reporting access for Regulators and Clients • Acceleration of the post-trade process • Near instantaneous settlement for funding transactions • Automated, peer-to-peer collateral management • Peer-to-peer distribution, linking fund manufacturers directly to their end clients opening up new revenue sources
  • 40. CAPITAL MARKETS & BLOCKCHAIN
  • 41. HURDLES • Scalability – Hard work being done • Regulation and Legislation • Operational Risks – Transition Risks • Governance
  • 42. HOW TO EMBRACE THE FUTURE? • Build Concrete Proof-of-Concepts • Challenge Service Providers • Quantify Cost Savings • Invest/Form Start-ups • Narrative for regulators
  • 43. THANK YOU • @anupmarwadi • https://www.hypertrends.com • anup@hypertrends.com