This document discusses the growing adoption of blockchain technology in the banking sector. It notes that major banks like Citi, UBS, and Santander are experimenting with and investing in blockchain. Venture capital funding for blockchain startups is projected to reach $1 billion this year. The document examines why distributed ledgers are useful for solving problems like reconciliation, transparency, and compliance costs. It provides examples of how blockchain could address issues like blood diamonds, proof of ownership, and operational risk in trade finance. Overall, the document advocates an open source and collaborative approach to solving big challenges through blockchain.

1. 1 | Blockchain Overview Open – Do not distribute without attribution
The “Blockchain” / Shared Ledger Landscape
Public Developments
• CBA now using Ripple for Intra Bank transfers
• UBS Blockchain lab getting significant pick-up
• Citi completed 12x Experiments 6x investments
and announced “Citi Coin”
• Santander announced 25 use cases for
blockchain technology
• Wells Fargo and JP Morgan created their own
“digital currency” (JP filed a patent)
• DLG announces 30 Banks join a global
consortium for Interbank ledgers
This year VCs will pump nearly $1Bn into
technologies designed to disrupt the Financial
Services Ecosystem
More in real terms than the internet received in
1996
The key to extracting opportunity is
understanding the *real* commercial problems

2. Cycle 1 of VC Investment in Bitcoin was predicated
on answering the wrong question

3. Why Distributed Ledgers?
Who are you and what do you want to achieve?
• Forks law – anything that requires censorship resistance will gravitate towards
censorship resistant systems
• Sams law – anything that does need censorship resistance will gravitate towards non
censorship resistant systems

4. What Problem Really Needs Solving?
Cost, Transparency, Reconciliation. Or simply destroying the capitalists?
• Banks spend near Google levels of $ on IT without as much productivity
• Banks are facing ever more reporting, and compliance legislation and regulation
• Each new regulation increases costs
• Some processes are stuck in the past
Composite Average Tier 1 Bank IT Spending*
$3Bn pa
Wallet / Disruptor IT Spending
~$1Mpa

5. Reconciliation Through Cryptography
• Today reconciliation happens through messaging and over night batch processes (Nostro /
Vostro). DLs settle between counterparties as “self clearing” networks
• In DLs Maths performs the reconciliation between counterparties making reconciliation
faster, near real time and the data more transparent
Today Tomorrow
Reconciliation through paper, many databases
2 – 5 day settlement of transactions
Reconciliation through cryptography “mining”
2 – 5 second settlement of transactions
Today Tomorrow
Credit Richard Brown for the Diagram

6. Why Distributed Ledgers?
1.Reconciliation through Cryptography
2.Highly replicable (viewable)
3.Granular Permissioning
4.Granular Privacy / Opacity

7. Three Examples of Problems being Solved
• Blood Diamonds
• Proof of Ownership
• Operational Risk in Trade Finance
• Proof of Signature / Execution of Contract
• Sharing Economy in Capex Purchasing
• Proof of Performance

8. Where do we go from here?
1.Open source and collaborative is key
2.Solving the big challenges will take time
3.The value is in the gaps between
organisations
4.How should the banks react?