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What does the blockchain mean for our payment systems?

I don’t know about you, but I’m completely confused about blockchains, sidechains and such like.  I admit it.  It’s beyond me and, if it’s beyond me, gawd knows how normal folk will make it out. 

The reason it’s so confusing is that we’ve recently seen the rise of blockchain companies like R3, Ripple, Erethreum, Eris and more.  What are they all doing and why do we need them?  Surely a blockchain is a blockchain?  Why do we need so many of them?

I asked this question around the exhibit hall of Money20/20 last week, and finally got a good answer from Chain.  Chain are the partners of Nasdaq, and also working with several other leading light companies, and they pitched it that there are many types of companies developing on the blockchain protocol. 

They even drew a chart …


… and split these firms into public and private blockchain developments that are either owned by the platform or offered as software.  Chain focus upon private blockchain software developments which effectively means that the company provides software that allows firms like Nasdaq to privately clear trades in real-time.  No bitcoin, no open systems.  Just Chain, software and the bitcoin blockchain protocol to allow private, real-time clearing.

This kind of sets the scene, and then they drew me another chart that made this even clearer.


This is the pro’s and con’s of the blockchain world.   Permission versus permissionless; trusted versus untrusted; controlled versus decentralised; structured versus democratised;  etc.

The gist of all of this for me is that there are 100’s of developments on the blockchain.  It is most likely that some form of controlled, permissioned system will emerge for the internet of value.  Who will develop that system is the question, and what role will the current clearing systems take in that system?  What will happen to the DTCC, Euroclear and TARGET2 structures?  Will we need SWIFT, Fedwire, CHIPS or STEP2? 

These are core questions about the future of our transaction processing systems and I don’t have the answers.  Do you?

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Ernie stelzner

    Those who don’t look for tomorrow will miss today.have a vision set the path and travel slowly,tackle the problems head on as you meet them and change the course as and when the situation dictates.dont be afraid of making mistakes.share ideas

  • We will not need the structures and software that currently supports an antiquated approach. If I want to sell you my BP shares why does it need to go through 5 layers of intermediary on the way up and 5 layers of intermediary on the way down?
    If a system or process is involved in providing trust then it is a candifldate for block chain. The recent economist article highlighted some issues Well worth a read

  • Yes. 😉 (Well some of them at least!)

  • It’s nice to see Proof of Work, Proof of Stake, closed vs open debates now being understood. We’ve come a long way from “BUT WHAT ABOUT THE ELECTRICITY USAGESGEGEGS?!” –
    Still, when you get really geeky into this stuff, the question is do I even need consensus? Do I need to chain blocks of transactions and share them with either a) Everyone (Bitcoin) b) 200 UNL validators (Ripple), or c) The counter parties.
    Do I need to replicate the data at all? Consider data privacy law? Safe harbour law? The design space for a regulated financial institution is very different for innovators.
    It’s all well an innovator saying “look this works!” – but if it wouldn’t pass the tests of legislation that’s still a chocolate tea pot.
    But can you have the same concept of a shared ledger, without actually *sharing* the ledger.
    Sounds like the stuff of science fiction, but is possible, if you go back to the Microsoft smart contract whitepapers from the early 2000s.
    There are some smart folks out there doing stuff but I don’t know that they see the whole picture. Even some of the bankers doing stuff.