Strolling around the SIBOS banking conference in Sydney last month I was struck by how many times the conversation turned to blockchain and other forms of distributed ledger technology (DLT), like Ethereum, or closed networks that are using the underlying blockchain technology.
But over the course of three days at SIBOS, talking to established players as well as the many fintechs in various stages of their evolution and business journey, it became clear that as Bitcoin approached its 10th birthday on October 31, blockchain has moved well past the hype of the cryptocurrency which spawned this revolution.
Business Insider has documented some real-world blockchain successes over the last few months. That includes this year’s blockchain tracked and monitored almond shipment from a Victorian farm to German delivery, and a World Bank Ethereum based bond. Australia’s Commonwealth Bank was involved in both these transactions, as we reported at the time.
We’ve also reported on blockchain based products being built by Fintechs like Assembly to aid in international trade and payments. Further along the journey is the recently listed Australian blockchain startup identitii.
Identitii’s founder and CEO Nick Armstrong isn’t exactly shy about the fact his business is based on the Ethereum blockchain technology. But he doesn’t overhype it, referring to the DLT which powers Identitii’s process allowing banks to enrich payment processes with detailed messages to ensure compliance and guard against cyber-crime, as simply “an enabler”.
Perhaps that’s because Armstrong has been a serial entrepreneur in the tech space and Identitii is just the most recent business he’s founded. Armstrong simply described Identitii is a traditional software play which uses new technology to assist global banks to improve their international payments compliance and security.
Describing the difference between cryptocurrencies and what his and other businesses do with DLT, Armstrong told Business Insider: “You have public and private blockchains, public blockchains typically involve cryptocurrencies, because that is how the people maintaining the servers, using the energy, get paid – the people that are colloquially known as miners”.
Private networks, Armstrong said, “are typically run by companies like banks who are paying for the servers, paying for the networking, paying for the energy, and there is typically no cryptocurrency involved”.
He described blockchain, or DLT, as “platform level or infrastructure level technology, like Linux, and there will be applications that are built on top of that infrastructure”.
That’s where Identitii operates, “at the application layer”. Currently, that is Ethereum, but Armstrong said his tech could work on other blockchains such as Fabric – another local member of Fintech Australia I spoke to at SIBOS. And he said Identitii’s application could also work on Digital Asset (DAML), the blockchain on which the ASX is basing its new post-transaction system to replace the current infrastructure, known as CHESS.
Cliff Richards, EGM Equity Post Trade at the ASX, said that this post-transaction space was where the opportunities are to reduce costs to the financial system and drive out inefficiency. He presented the planned changes to the ASX’s post-transaction system at the ASX booth on level 1 of the ICC in Sydney where SIBOS was being held.
Richards said utilising the DAML smart contract programming language on the Digital Asset blockchain satisfied the five key questions the ASX needed to be answered by the technology if it was to replace CHESS.
Those questions went to the very heart of the integrity of the system the ASX runs and included:
- synchronisation – keeping multiple copies of data in independently provable sync, which reduces reconciliation;
- automation – the ability to automate workflows within and across different legal entities in a safe and deterministic way;
- privacy and confidentiality – in a manner which enables only the parties to the transaction to have a copy and see the details;
- verifiable smart contracts – ensuring the integrity of the system; and
- throughput – ability to handle large volumes of transaction at speed.
Satisfying these criteria would enable the various counterparts in the web of processing security transactions – end holders, brokers, and custodians, on both sides of the deal – to transact at speed, safety, and with confidence.
Richards said the Digital Asset technology satisfied all 5 of those questions and “has been tested to throughput rates of 27,000 trades a second was a scalable solution for the ASX and the local market”.
Blockchain is increasingly a protocol through which banks and businesses can work together to decrease costs and increase the efficiency and provenance in their transactions. The technology is increasingly being deployed across a diverse array of sectors in the economy to open up opportunities for efficiency, productivity, and cost savings. As a result the face of banking, finance and trade across the Australian and global economies is changing.
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