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How can blockchain help the business problem?

23 February 2016 | 12265 views | 6

Professor Tony O’Donnell, Head of Research and Innovation, Infosys Finacle, discusses how blockchain may fit into a bank’s strategy, and the implications of regulation around distributed ledger technology.

Comments: (6)

A Finextra member
A Finextra member | 23 February, 2016, 15:06

I still struggle to understand how an account holder/asset holder will benefit from block chain.

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A Finextra member
A Finextra member | 24 February, 2016, 11:46

Hi John - thanks for the comment. While there is a significant amount of hype around distributed ledgers, there are a number of potential benefits to the end user, such as reduced charges\fees, improved liquidity due to shortened settlement cycles (particularly on securities) and greater availability of data to drive analytics models for risk management and even pricing. 

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A Finextra member
A Finextra member | 25 February, 2016, 14:34

Tony - Having extensive experience of the installation of Banking Systems I wonder where the seeds of this technology are likely to first take root?  Are the banks looking to install a “Bitcoin module” and manage such digital assets much like they traditionally have done or are we more likely to see this tech deployed in financial intuitions in more disparate areas such as Identity Management, Change Control or in tagging the ownership of Digital Property in the early stages?

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A Finextra member
A Finextra member | 25 February, 2016, 14:59

Bitcoin and blockchain represent distinct opportunities. 

In the pure cryptocurrency space, banks may consider wallet services for bitcoin users as well as exit points back to fiat currencies.

The distributed ledger space is more of an infrastructure proposition at the backend. I could see some integration via existing protocols with new adapters to handle connectivity, and either a hybrid with existing systems like SWIFT or perhaps a wholesale displacement at the 'transport layer'. 

Outside of banking, you may see applications where the 'chain of evidence' needs to be preserved such as advanced engineering or even media.

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Orest Monokandilos
Orest Monokandilos - Trade Wise Capital - San Francisco | 05 March, 2016, 07:07 My understanding is that Bitcoin has a limited life-span (limited number of years that it is expected to be in existence due to the algorithm behind it). When you mention Bitcoin - do you mean crypto-currency or virtual currency similar to Bitcoin? Another area of my particular interest - currency exchange rates. Do you see any way public ledgers or Bitcoins are going to create a way for retail customers to decrease the risk of currency exchange or create a way to hedge future currency exchange risk?
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A Finextra member
A Finextra member | 14 March, 2016, 14:26

Hi Orest - thanks for taking the time to reply. You are right about there being a mathematical limit to the total volume of Bitcoin that can be produced. In some ways, this makes the current wave of Bitcoin mining analagous to property on an island (Manhattan say), being slowly claimed into lots. Eventually there is no more land, and perhaps a second dimension may emerge in a future wave (think vertical in NY).

In terms of pricing in a general sense, not just FX, I think public ledgers and robot analysts could do some really interesting work to validate fair prices and to manage risk - especially around derivatives.

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