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Blockchain, Cryptocurrencies and Banking.

SUMMARY©

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▪ 1) Evolution of Money ▪ 2) Blockchain Definition ▪ 3) Benefits:

✓ Blockchain Banking Applications ✓ Removal of Intermediaries ✓ Voting Management ✓ Dividends and Shares ✓ The Blockchain as a Proof Chain ✓ Crossing the Border with a Blockchain

▪ 4) Challenge: Which blockchain to use ? ▪ 5) The Future of Banking

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Evolutionof Money

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Human beings have had a love affair with the concept of money. From physical currencies to digital technologies such as « Bitcoin », cryptocurrencies are taking coinage into a new era.

1. Evolution of Money

ShellsMiniature replicas

of tools made of bronze

Coinage often made from precious and rare

metals like silver and gold

Cryptocurrencies

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Blockchain Definition

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2. What is a blockchain?

« A blockchain is a chain of information broken up into blocks of data and each one is protected using public - private key encryption.  To access the data, you need the proper key.»

Cryptocurrencies (i.e. : bitcoin) use the blockchain as a conduit.

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Blockchain can be compared to DNA

2. What is a blockchain?

Each block contains a specific piece of information.

Each block of data represents a transaction of currency and you can

follow the chain to build up a picture of each transaction through to the

current one.

The individual units (nucleotidesof the gene, i.e. ATGC) can be

described as being a simple codon.

Each gene contains a specific piece of

information.

Similar to how a gene in DNA is transcribed into blue eyes

or blonde hair.

Like the encryption in the block -chain.

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Benefits of Blockchain

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3. Blockchain Banking Applications

• The evolution or revolution, in the way bitcoin mechanisms operate, has not been lost on banks.

• Cryptocurrencies are being seen as a new innovation from the Fintech sector to sweep away some of the more legacy business models in banking.

Many banks (Citi, Santander, UBS…)

are now starting to embrace the idea of

blockchain.

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• Blockchain allows to transfer assets worldwide on a secure way in P2P.

• Encrypted transactions are registered in a ledger authenticated by more than 2 witnesses from the blockchain ecosystem.

3. Blockchain Banking Applications

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3. Removal of IntermediariesIs it possible? Yes!

The inherent cryptography based security of the blockchain can make this possible.

Current system:

• Banks have a centralised ledger which acts as a custodian.

Blockchain:

• No central ledger - It’s a decentralised trust model not dependent on a single entity.

• Financial market researchers (TABB Group), have speculated that the use of the blockchain in syndicated loans may happen as early as Q2 2016.

• The financial sector needs to have its check and balances in place, such as agreed standards. (TABB Group)

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3. Voting Management

• Proxy voting has become complex. It involves a chain of processes that culminate in a vote.

• The vote may well be crucial to the continuation of a company and can involve M&A.

• Votes management has taken an electronic route more recently with the allowance for electronic proxy voting.

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lCan be open to fraud and security issues

The use of the blockchain as a proxy voting mechanism:

“The Estonian NASDAQ market will be using blockchain based technologyto provide proxy voting at AGM’s and all possible from a voter’s mobile device” (October 2015).

Bob Greifeld - NASDAQ Chief Executive

Boost voting turnout+

Retain the ease of use of an electronic vote

Improve security

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3. Voting Management

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3. Dividends and Shares

• In 2015, the U.S. Security and Exchange Commission (SEC) approved the use of blockchain technology to allow Internet trader Overstock.com to issue company shares.

• Blockchains keep a record of every transaction and its owner, throughout the lifetime of a given piece of information (including a stock certificate). Transactions are handled in a very seamless and traceable manner.

overstock.com Company Dividends=

© Copyright Sopra Banking Software 2015

3. The Blockchain as a Proof Chain

• Can be used to verify the status of a given transaction or data entity at a given time.

• Any type of information can be encrypted and placed within the blockchain = Database

• Transactions are verified by a community of users for an increased level of trust.

• Each part of the block in the chain is individually time stamped and cryptographically signed.

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• Any process that now requires documentation and proof of validity or certification could have those paper documents replaced by individual blocks.

• The blockchain could be used to create certified and verified identities for a greater level of assurance when performing financial transactions.

• Even processes such as the certification of precious gemstones could benefit from blockchain technology; speeding up the process and building in hardened trust models that go beyond the centralized, single intermediary system we currently have.

3. The Blockchain as a Proof Chain

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3. Crossing the Border with a BlockchainSeamless cross-border payments

Current challenges• Frictions • Multiple banks • Multiple intermediaries

Blockchain makes the experience more streamlined and reduces costs.

Advantages of a blockchain• Simplifies process based on inherent

accountability, assurance and verification • Allows localised transactions • Makes cross-border payments as easy as

exchanging emails between countries • Allows for financial system compliance by

auditing each part of the money movement through the chain

SUMMARY©

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Which Blockchain to

Use?

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4. Which Blockchain Should be Used?

Should we use a private blockchain…

• Some would like to impose their blockchain: Ripple and some Fintech companies such as Etherium.

…or open one?

• The blockchain community and banks are against relying on a company to transfer their asset securely.

Private blockchain or Open blockchain?

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The Future of Banking

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of those were actively exploring their use.

5. The Future is Blocked

The previous issue around the obfuscation of and inability to trace transactionsand the criminal elements use of cryptocurrencies is being left behind.

The positive aspects of the blockchain technology for creating more efficient and speeded up processing systems is now too attractive to ignore.

of the surveyed financial professionals believed that technologies like the blockchain would be beneficial to institutional markets.

94%

50%

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http://www.soprabanking.com/

Learn more on Blockchain, Cryptocurrencies, and Banking on: http://www.soprabanking.com/market-insights