Blockchain Technology

Adoption

S e p t e m b e r 2 0 1 7

INDEX

1. Adoption of DLT in the Financial Sector

2. Payments Settlement: Present & Future

2

3

Adoption of DLT

4

From the Internet of Information…

The emergence of the Internet of Information in the 90s was possible thanks to the creation of the Internet Protocols (TCP/IP, HTTP,

SMTP…).

Internet Protocols enabled open innovation to flourish. Companies like Amazon, Ebay, Rakuten, Google and Alibaba were born

once Internet Protocols gained adoption.

Today information moves seamlessly over the Internet, and due to its open and neutral nature, the Internet has given raise to all

types of products and services that were previously unimaginable.

Timeline

HTTP and the World Wide Web are created by Tim Berners Lee

Alibaba is founded

Microsoft is born First Mainframe computers

Amazon is founded

Rakuten is founded

1998 1999 2004 1994 1974 1976 1995

TCP/IP Vince Cerf and Bob Kahn create the Internet Protocol

Google, Tencent and PayPal are created

Facebook is founded

Ebay is founded

1993 1975

Mosaic web browser is created

1950s 1989

Apple is founded

1997 1988

NTT DATA is founded

5

The Internet of Value will make for money and other forms of value what the Internet did for information.

Analogous to the Internet of Information, the Internet of Value needs open protocols and standards to enable the many value

networks in the world to connect with one another and become interoperable.

As banks and other financial institutions adopt open standards like Interledger (ILP) to connect between each other and with

Blockchain networks, we’ll see the Internet of Value emerge.

Blockchain technology and smart contracts will enable programmable money and frictionless transfers of digital assets, lowering

the cost to transact and giving rise to seamless transactions between people, institutions and the IoT.

…to the Internet of Value

Timeline

Ripple is born (first currency agnostic blockchain)

Ripple becomes the standard for international money transfers between banks ILP becomes the standard protocol for connecting banks’ cash ledgers (as part of Ripple’s software)

Interledger (ILP) is invented Ethereum is born Hyperledger is created

2012 2015

R3 Consortium is born

2014 2009

Bitcoin is invented (first blockchain)

Blockchain solutions for Capital Markets and Trade Finance emerge (R3 Corda, DAH, Fabric, etc.) ILP Java becomes the interoperability standard for Hyperledger Foundation projects

2016

SBI Ripple Asia (Japan) is born First DLT banking network (Ripple GPSG)

2020-2025 2017-2020 2025-2030

Blockchains and Distributed Ledger solutions mature, and all asset exchange networks become interoperable with ILP

Blockchain & DLT Adoption and Maturity

Technology Breakthrough

Experimental platforms

Maturity and Adoption

Enterprise-level platforms for specific use cases

Meeting the rising demand for faster, more cost-efficient

international payments

Testing the use of crypto currencies and smart contracts

Automating reconciliation to speed

up post-trade services

Pushing the digitalisation of trade to reduce risk and fraud

t

Blockchain Technology Cross-Border Payments Capital Markets

Trade Finance

6

FABRIC

7

Interledger Protocol

Application Layer

Transport Layer

Core Layer

Network Layer

Information

Internet Protocol

TCP UDP

HTTP SMTP VoIP

PSK IPR

Interledger Protocol

SPSP HTTP-ILP

PayTorrent

Value

Interledger Stack

Hyperledger Foundation Members

8

For the advancement of Blockchain Open Standards

The Linux Foundation leads the biggest Consortium of

Technology Companies and Financial Institutions

collaborating to establish DLT and Blockchain

technology standards.

NTT DATA is a member of Hyperledger, and as such

we aim to become the best technology partner for

Hyperledger member companies, who are working to

adopt blockchain and distributed ledger based

solutions.

With this objective we are working on the

development of the Interledger Java software, which

will facilitate transaction interoperability across banks,

settlement networks and platforms. And more

9

Payments Settlement Present and Future

10

Cross-Border Real-Time Gross Settlement 1980-2017

RTGS systems reduce systemic risks by removing the settlement risk from interbank payment flows

RTGS Systems today operate in daily batch

process cycles

RTGS systems don’t provide real-time settlement capability

RTGS systems’ access is restricted to local

banks in each country

Consequently, correspondent banks are needed to access foreign currency corridors and liquidity pools

Correspondent banks work in oligopolistic markets and use antiquated technology to settle transactions across countries. For these reasons, international transactions are expensive, slow and error prone

CLS – Continuous Link Settlement, Old, slow and expensive Infrastructure used by Correspondent Banks

RTGS Systems Local Payments Correspondent Banks (CB)

CLS

CLS

CLS

CLS

ZENGIN BOJ - NET

SEPA TARGET 2

ACH FEDWIRE

HVPS / BEPS CDFCPS / CFETX

FPS BACS / CHAPS

11

Banks’ Adoption of Real-Time Settlement DLT 2017

Ripple Solution: Payments Software that banks integrate to settle funds in real-time with other banks DLT: Distributed Ledger Technology

ZENGIN BOJ - NET

SEPA TARGET 2

ACH FEDWIRE

HVPS / BEPS CDFCPS / CFETX

RTGS Systems Local Payments

FPS BACS / CHAPS

ILP

ILP

ILP

ILP

CB & LP

ILP

50 Japanese Banks are currently integrating with RippleNet through xCurrent to make real-time payments (including Mizuho, Bank of Tokyo Mitsubishi and Resona)

xCurrent uses the Interledger Protocol (ILP) for making transactions across banks’ ledgers

All over the world many other financial institutions are also joining RippleNet to make interbank local and international payments

As banks accelerate the RippleNet adoption worldwide, financial institutions will start using the XRP Ledger for liquidity provisioning and cross-currency Global RTGS

Aware of the fast changing financial landscape,

Everis and NTT DATA are developing Interledger Java, an implementation of the Interledger Protocol, to facilitate real-time settlement of transactions across banks, payment systems and Capital Market platforms

12

Cross-Border Real-Time Gross Settlement 2020-2025

XRP Ledger – Modern Distributed Ledger based Global RTGS system and liquidity marketplace CB & LP – Correspondent Banks & Liquidity Providers

The Global RTGS will remove friction, costs and risks from cross-currency transactions

Distributed ledger technology, and in particular the XRP Ledger, will enable banks to settle cross-currency transactions in real-time (something

impossible today)

The XRP Ledger can be accessed by all banks and liquidity providers, enabling healthy competition between banks and a better service for customers

Correspondent banks and liquidity providers will be able to reach more currency corridors and new customers, improving their service offering for other banks and their clients

The Interledger Protocol (ILP) will enable financial

institutions and central banks to make their existing infrastructure and processes interoperable with other currencies, asset classes and the XRP Ledger, the global liquidity marketplace and the Global decentralised RTGS system

ZENGIN BOJ - NET

SEPA TARGET 2

ACH FEDWIRE

HVPS / BEPS CDFCPS / CFETX

RTGS Systems Local Payments Global RTGS

FPS BACS / CHAPS

ILP

ILP

ILP

ILP

ILP

CB & LP

ILP XRP Ledger

13

Interledger : Enabling Interoperability Across Platforms 2020-2025

Blockchains

& DLTs

Capital

Markets

Trade

Finance

Internet of

Things

Payment

Platforms

Other

Platforms

Marketplaces

Money Networks Platforms

Fabric

ILP

ZENGIN BOJ - NET

SEPA TARGET 2

ACH FEDWIRE

HVPS / BEPS CDFCPS / CFETX

FPS BACS / CHAPS

ILP

ILP

ILP

ILP

ILP

ILP XRP Ledger

e v e r i s . c o m