FinTech Solutions

•BLOCKCHAIN
 FINANCIAL NETWORKS,
MARKETS & WEALTH

• Businesses don’t exist in isolation

• Connected to customers, suppliers, banks,
partners etc. through Business Network~
Financial Network
• Networks cross geography & regulatory
boundary

• Wealth is sum-total of value of goods & services

across business network

• Flow of goods & services across business

network is a Market
• OPEN (fruit market, outcry commodities, or
CLOSED (supply chain financing, bonds)
 W H AT I S T H E PR O BL EM I N EX I S TI N G N E TW O R K

Difficult to monitor asset ownership & transfers in a business network

Vulnerable
Inefficient
Expensive
 HOW TO OVERCOME THE PROBLEM

Solution- a shared ledger

Provenance Finality

consensus Immutability
 BLOCKCHAIN IN A NUTSHELL

Append-only system of Business terms embedded in

record shared across transaction database &
business network Shared executed with transactions
Ledger Smart Contract

Ensuring appropriate Privacy Validation All parties agree to

visibility; transactions are network verified
secure, authenticated & transaction
verifiable

Broader participation, lower cost, increased efficiency

 BLOCKCHAIN IN A NUTSHELL

Shared Ledger

• Records all transactions across business network

• Shared between participants

• Participants have own copy through replication

• Permissioned, so participants see only appropriate transactions

• The shared system of record

 BLOCKCHAIN IN A NUTSHELL

Smart Contract

• A legally binding, digitally manifest agreement with the power to reengineer

itself dynamically, depending on the terms and conditions of the commercial
context to which it applies, via an implicitly encoded set of rules

• Removal of manual intervention and oversight (e.g. from legal counsel)

• Speed of contract creation and execution

• Automated transfer of funds via computer recognizable/definable events

• Defines contractual conditions under which corporate Bond transfer occurs

 SMART
CONTRACT
 SMART
CONTRACT
LIFECYCLE
 S M A RT C O N T R A C T U S E C A S E

$6 billion
Maximum savings that can be
generated by the US mortgage
banks using smart contracts

Source: Capgemini Consulting Analysis;

 BLOCKCHAIN IN A NUTSHELL

Privacy

 Ledger is shared, but participants require privacy

 Participants need:
–Transactions to be private
– Identity not linked to a transaction

• Transactions need to be authenticated

• Cryptography central to these processes

 CRYPTOGRAPHY

•Cryptography is a method of protecting information and

communications using codes, so that only those for whom the
information is intended can read and process it.

• Confidentiality: the information cannot be understood by

anyone for whom it was unintended

• Integrity: the information cannot be altered in storage or

transit between sender and intended receiver without the
alteration being detected

• Non-repudiation: the creator/sender of the information

cannot deny at a later stage his or her intentions in the
creation or transmission of the information

• Authentication: the sender and receiver can confirm each

other's identity and the origin/destination of the information
 BLOCKCHAIN IN A NUTSHELL

Validation

Transaction verification & commitment

• When participants are anonymous

– Commitment is expensive
– Bitcoin cryptographic mining provides verification
for anonymous participants but at significant
compute cost (proof of work)

• When participants are known & trusted

– Commitment possible at low cost
 B L O C K C H A I N I N L AY M A N T E R M S

A technology that:

permits transactions to be
gathered into blocks and
recorded;
cryptographically chains
blocks in chronological
order; and

allows the resulting ledger

to be accessed by different
servers.
 REDUCE COSTS AND COMPLEXITY
Blockchain technology offers a way for market participants to access dematerialized assets
directly without always going through other participants needlessly

….
Depository Participant Participant Participant .…

Centralized Repository (today’s system): most participants are disconnected from their asset depository, settling
transaction would require participants to collaborate in a flow that is slow, inefficient, and expensive

Custodian Trade Trading ….

CCP .…
Bank Repository Platform

Depository (assets dematerialized on shared ledger)

Shared Repository: all participants can interact with depository directly without going involving
third parties, potentially making post trade operations cheaper and faster
 D I S T R I B U T E D L E D G E R T E C H N O L O G Y

Centralized Ledger Distributed Ledger

Client Node A
A

Node E Node B
Client Client
D Bank B

Client Node D Node C

C

• There are multiple ledgers, but Bank holds • There is one ledger. All Nodes have some level
the “golden record” of access to that ledger.

• Client A/B must reconcile its own ledger • All Nodes agree to a protocol that determines
against that of Bank, and must convince the “true state” of the ledger at any point in
Bank of the “true state” of the Bank ledger time. The application of this protocol is
if discrepancies arise sometimes called “achieving consensus.”
HOW MIGHT A DISTRIBUTED LEDGER WORK?

Users initiate
Users Broadcast One or more Nodes
transactions using
their transactions to begin validating
their Digital
Nodes each transaction
Signatures

Nodes aggregate
Consensus protocol Nodes Broadcast validated
used Blocks to each other transactions into
Blocks

Block reflecting “true

state” is chained to prior
Block
 THE POWER OF DISTRIBUTED LEDGERS

It can be used It can be used to

It can be used to
without a It can be used to allow owners of assets
record those
It can be transfer value or to exercise certain
central transfers of value or
used to the ownership of rights associated with
authority by ownership of assets
create value assets ownership, and to
individuals or These records may be record the exercise of
or issue A human being or a very difficult to alter,
entities with no assets Smart Contract can such that they are
those rights.
basis to trust initiate the transfer sometimes called
effectively immutable
each other Proxy Voting

The degree of trust between users determines

the technological
configuration of a distributed ledger.
 FINANCIAL
I N D U S T RY
A P P L I C AT I O N S
BEST SUITED FOR
BLOCKCHAIN
Cryptocurrency
 CRYPTO ASSETS

Cryptoassets are digital assets which use cryptographic techniques

to generate a medium of exchange of financial transactions
• Cryptocurrencies

• Platform tokens

• Utility tokens

• Transactional tokens
 CRYPTO ASSETS

Platform tokens

Platform tokens were created to act as a platform for the

development of other Decentralised projects. The largest
platform token is Ethereum. Ethereum’s Decentralised
platform provides a hardware and software base for the
development of Decentralised applications (dApps). The
introduction of smart contracts allows new projects to be
built upon the Ethereum platform and specify their own self-
executing smart contracts on the blockchain.
 CRYPTO ASSETS

Utility tokens

• Utility tokens (or sometimes protocol tokens) are usually

ERC20 tokens built on the Ethereum platform. Examples
include OmiseGO, Filecoin, Bancor and BAX. These tokens
are usually created with a specific purpose in mind,
bespoke to the project that issues them.

• Utility tokens are often used for Initial Coin Offerings (ICO).
While performing a utility token ICO company issues a
certain number of tokens that are sold to the community
(mostly in several rounds for different prices).
 CRYPTO ASSETS

Transactional tokens
• Transactional tokens are used to transact—they serve as
units of account and are exchanged for goods and
services. These tokens often function like traditional
currencies, but in some cases, provide additional benefits.
For example, with decentralized cryptocurrencies, such as
Bitcoin and Dai, it is possible for users to execute
transactions without a traditional intermediary or central
authority, such as a bank or payment gateway. In addition
to its function as a currency, Dai offers transactional
performance to other networks.

• Not all transactional tokens are currencies.

 CRYPTO ASSETS

Cryptocurrency
A cryptocurrency is a digital or virtual currency designed to work
as a medium of exchange. It uses cryptography to secure and
verify transactions as well as to control the creation of new units of
a particular cryptocurrency.
Cryptocurrency properties
1) Irreversible: After confirmation, a transaction can‘t be reversed.

2) Pseudonymous: Neither transactions nor accounts are connected to real-

world identities.

3) Secure: Cryptocurrency funds are locked in a public key cryptography

system. Only the owner of the private key can send cryptocurrency.

4) Fast and global: Transactions are propagated nearly instantly in the

network and are confirmed in a couple of minutes.
 THE BASIC
C RY P T O C U R R E N C Y
ARCHITECTURE
MAJOR CRYPTOCURRENCIES
HOW BITCOIN WORKS
 C E N T R A L B A N K D I G I TA L C U R R E N C Y ( C B D C )

CBDC as electronic CB money that:

(i) Can be accessed more broadly than reserves,

(ii) Potentially has much greater functionality for retail transactions than
cash,

(iii) Has a separate operational structure to other forms of Central Bank

money, allowing it to potentially serve a different core purpose, and

(iv) Can be interest bearing, under realistic assumptions paying a rate

that would be different to the rate on reserves.
 WHY ISSUE A CBDC?

(i) Improve efficiency of payment systems

(ii) Transition towards a less-cash society

(iii) Competition from private e-money

(iv) Improve cross border payments efficiency

(v) Ensure public access to legal tender if cash were phased

out.
 CRYPTOASSET
EXCHANGES

•A cryptoasset exchange allows participants to

trade cryptoassets. It provides an online
matching platform for supply and demand.
There are currently over 210 exchanges listed,
most of which are centralized, meaning there
is a trusted middleman to handle the trades.
Based on volume and estimated revenues, the
top three cryptoasset exchanges are
centralized cryptoasset exchanges (CEXs),
such as Binance, Huobi and OKEX.