But lack of trust and regulatory uncertainty means few businesses have fully committed. Here’s a look at where companies are in their blockchain journey, and four strategies for navigating this new world.
Signs of the new blockchain world
Tokenised everything The representation of real or virtual assets on a blockchain is spreading to raw materials, finished goods, membership rights, and more. These digital tokens will transform company processes and usher in new business models.
ICOs are self-funding the tech Initial coin offerings, in which a company sells a predefined number of digital tokens to the public, are a growing alternative to classic debt/capital funding. They’re raising billions of dollars for the development of blockchain technology platforms.
ERP + blockchain Enterprise software platforms that are the engine for company operations like finance are beginning to integrate blockchain. Using blockchain with their ERP systems, companies can streamline processes, facilitate data sharing, and improve data integrity.
New leaders emerge Our survey respondents still perceive financial services to be the current and near-term future leader of blockchain, but other industries are on the rise (see the diagram above).
It’s hard to trust blockchain
By design, blockchain can foster trust. But in reality, companies confront trust issues at nearly every turn. 45% believe lack of trust among users will be a top barrier.
A new study of the global open-source platform, GitHub, offers key lessons on blockchain development—how projects have grown, what’s likely to come next, and the implications for financial services firms.
Repositories reveal interesting trends about organizations
The core code supporting Bitcoin was published in April 2009. Since then, the number of projects on GitHub related to blockchain has grown significantly, averaging more than 8,600 new projects a year. In 2016 alone, there were almost 27,000 new projects (figure 3).
The growth in the number of projects has been matched by the rapid growth of content produced to develop these blockchain technologies. Please see figure 4, and Repositories by year in our interactive dashboard.
In analyzing blockchain repositories and their content, we noticed that increasingly more organizations appear to be getting involved. In 2010, organizations developed less than 1 percent of all projects. By 2017, their blockchain projects accounted for 11 percent (organizations currently account for 7 percent of total—not just blockchain—software development on GitHub). And recent data about the rate at which commercial organizations can find success with blockchain initiatives through open source seems promising; some high-profile, large commercial entities are already doing so. (Please refer to Repositories by organization in our interactive dashboard.)Of particular significance, some projects that organizations have developed have resulted in new platforms (such as Ethereum, Ripple, Corda, and Quorum) which some developers now use to build applications. Organization-owned projects also tend to be updated more frequently than those developed by users, and are reportedly five times more likely to be copied, implying that the blockchain community has deemed them most relevant.When a project is copied, all of the content becomes available to the account that copied the project, thus working as a de facto knowledge-transfer mechanism. This process is commonly referred to as a citation network, where projects that are most often copied occupy a more central role in the network of projects, which we refer to as project centrality. Under this rubric, some of the most central projects have been developed and maintained by organizations: Bitcoin core, the C++ and Go implementation of Ethereum, Python clients for Ethereum, and the Bitcoin Improvements Proposal. To interactively explore a depiction of the various networks in GitHub, please see Network visualization in our interactive dashboard.
When exploring the aforementioned interactive graph, keep in mind that the initial projects of Ethereum and Bitcoin are maintained by organizations (foundations), and that a vast amount of blockchain projects and applications in GitHub are actually built on top of these two projects. In short, organization-led projects are the backbone code for thousands of other projects. Out of the 20 most central projects in the blockchain space measured by popularity, citation, and collaboration , 18 were created and maintained by organizations.
Organizational commitment in open source appears to be dominating the core development of blockchain because it is most likely more demanding and purposeful than individual participation in development. Once resources are put into place by an organization, there is generally more incentive to ensure that the project is successful. Given that organization participants are tied to one another beyond any particular project, there is often greater accountability to one another, which also drives ongoing development.
This study provides an empirical overview of the current state of both enterprise and public sector use of blockchain and distributed ledger technology (DLT). The study gathered data from over 200 enterprise DLT start-ups, established corporations, central banks and other public sector institutions, including non-public data obtained through confidential online surveys.
The study also explains the concept of ‘blockchain’ and DLT, highlights the different DLT architectures, and dives into governance-related issues. Finally, an entire section is dedicated to investigating how the public sector is approaching DLT.
Key Highlights Of The Report
Significant growth of the enterprise DLT ecosystem: at least 115 DLT start-ups employing more than 2,000 people are active in the ecosystem, in addition to large established corporations that increasingly set up entire business units and research labs exclusively dedicated to DLT
The protocol layer is slowly maturing: several dozen start-ups and established corporations are building and improving the core infrastructure (protocol frameworks,
core building blocks), but ‘immature technology’ is still considered one of the key challenges to broader DLT adoption
Only limited network and application deployment to date: the vast majority of users are experimenting with small-scale, isolated networks; live applications are mostly built as ‘permissioned layers’ on public blockchains
Majority of use cases focus on financial services: the majority of enterprise DLT companies are targeting financial and insurance-related use cases and actors, but increasing attention is being given to non-monetary applications (e.g., identity, supply chain, intellectual property)
Trend towards opening core infrastructure platforms: an increasing number of companies are open-sourcing their codebases, shifting monetisation of the platforms to higher stack levels (e.g., consulting, application development, support)
Key challenges to broader DLT adoption remain: unclear regulatory environment and legal risks are most often mentioned as key challenges; study participants consider privacy and confidentiality to be more of an issue than scalability and performance concerns
Interoperability still in its infancy: the current landscape is fragmented and comprised of incompatible protocols, but there is an increasing focus on developing common standards via the joint development of enterprise DLT frameworks by a variety of consortia
Significant public sector DLT activity observed: local, regional, national and multilateral institutions are all engaged in DLT-related activities; 77% of countries represented in the study have multiple institutions showing an interest in DLT
Public sector institutions are experimenting with a variety of DLT protocols: 63% of central banks and 69% of other public sector institutions (‘OPSIs’) have already been involved in proofs of concept and/or running trials; OPSIs are generally further ahead than central banks
Ethereum has been widely tested at central banks: 57% of central banks are experimenting with either the public Ethereum network or a permissioned version
Existing DLT deployment plans: 15% of OPSIs plan to deploy DLT-based applications this year, and another 23% plan to do so within the next two years; the timetable for central banks is more conservative than for OPSIs
The story of Q2 begins with a rally that saw the total value of all cryptocurrencies rise to $100 billion, up from $25 billion at the start of the quarter.
Another way to put it is that the total market value of blockchain tokens skyrocketed 4x to an all-time high above $100 billion.
ICOs emerge as ‘killer app’
ICOs helped propel this growth and established a powerful trend in Q2.
The supply of new tokens exploded and crowdfunding and investment returns stunned the world. (To track the escalating funding totals, CoinDesk even went so far as to launch its own dedicated ICO tracker, a free tool that tallies fundraisings via the mechanism).
One useful metric that underlines ICO dominance is how much more successful ICOs were versus traditional VC funding in the blockchain industry.
Mixed sentiment around ICOs
As part of the State of Blockchain, CoinDesk conducted a sentiment survey designed to leverage the insights of its global readership.
This quarter’s survey had over 1,300 respondents, and it served to capture the unease some investors felt as the blockchain use case took off.
In 2017, bitcoin’s total domination of the ecosystem shrunk considerably.
At the start of the year, bitcoin represented almost 90% of all the value in cryptocurrencies. By the end of Q2, that number tracked down to almost 41%.
France Stratégie, laboratoire d’idées public, a pour mission d’éclairer les choix collectifs. Son action repose sur quatre métiers : évaluer les politiques publiques ; anticiper les mutations à venir dans les domaines économiques, sociétaux ou techniques ; débattre avec les experts et les acteurs français et internationaux ; proposer des recommandations aux pouvoirs publics nationaux, territoriaux et européens.
Pour enrichir ses analyses et affiner ses propositions France Stratégie s’attache à dialoguer avec les partenaires sociaux et la société civile. France Stratégie mise sur la transversalité en animant un réseau de sept organismes aux compétences spécialisées.
Le département Développement durable et Numérique est chargé des politiques sectorielles (environnement, énergie, transport), du développement du numérique (technologie, implications numériques et sociales) et de leurs déclinaisons industrielles.
Il place, pour l’ensemble de ces sujets, le développement durable, en particulier la lutte contre le changement climatique et la préservation de la biodiversité, au cœur de ses préoccupations sans oublier pour autant la compétitivité industrielle et les questions de redistribution.
Dans le cadre de ses travaux, le département est amené à collaborer avec des organisations non gouvernementales, des universités et des entreprises ainsi qu’avec d’autres administrations et instances gouvernementales.
La blockchain, technologie sous-jacente à la crypto-monnaie Bitcoin, est inscrite à son programme de travail. Un groupe de réflexion ad hoc a été créé en vue de la production et de la publication d’un rapport à l’automne 2017.
How can blockchain and smart contracts benefit securitization?
We will explore in detail how potential benefits could play out at the different stages of the securitization lifecycle, but for now, here are some common themes to keep in mind:
One version of the truth. Blockchain enables a single, consistent source of information for all participants in the network. In an industry that currently faces inefficiencies around the storage, reconciliation, transfer, and transparency of data across multiple independent entities, this feature could be highly beneficial.
A complete, immutable, and traceable audit trail. From loan origination to primary issuance, servicing, and changes in ownership in the secondary market, blockchain can create a chronological and immutable audit trail of all transactions. With this capability, regulators and auditors could finally get a systemic view of the ownership of the underlying securitized assets. An issue that troubled the industry during the global financial crisis—determining who owned the title to some underlying assets—could be more easily resolved.
Better valuation and price discovery. The transparency facilitated by blockchain could reduce the information asymmetry and network disadvantages that some entities, especially smaller ones, currently face in the securitization industry. The resulting market efficiency could raise the investment appeal of securitized assets and deepen the potential pool of investors.
Speed and certainty. Blockchain, through its disintermediation and simultaneous recording of information across the system, can virtually eliminate time lags in information and payment flows throughout the securitization process, including in the secondary market. This increase in speed and certainty could significantly reduce counterparty risk, release capital, and reduce the return thresholds that investors demand.
Security. Blockchain’s capacity to increase the security of transactions and data, and mitigate fraud could be appealing to the securitization industry, where integrity of data is paramount. Blockchain’s immutable audit trail, for example, could permit every asset (and every transaction involving that asset) to be linked to a particular security, facilitating asset perfection and eliminating the risk of double-pledging assets.
The combined impact of all the above advantages—greater efficiency, speed, transparency, and safety for data and transactions—could lower risks in the securitization market as a whole and lead to greater investor interest. This in turn could improve prices, volume, and spreads. With better and more transparent information, regulatory compliance could also be simplified and market failures could become less likely.
With these general points in mind, we will now take a more detailed look at the specific places where blockchain could impact the securitization process, ranging from loan origination and loan servicing through the structuring, review, and initial sale of the security, to the servicing of the security, ongoing ratings monitoring, and secondary market trading. At each stage, we will look at some inefficiencies in the current process, then explore how blockchain is likely to change how the industry handles certain questions around its core functions and obligations, including data recording and dissemination, transaction execution, receiving and making payments, and regulatory compliance.
We will also look at why, despite the likely advantages, implementing a blockchain in the securitization industry may be challenging. We will conclude with a vision of a possible future state and with ideas about possible next steps.
According to our recent blockchain research, government organizations across the globe
are exploring use cases for blockchains that can impact their jurisdictions. With the support of the Economist Intelligence Unit, the IBM Institute for Business Value surveyed 200 government leaders in 16 countries on their experiences and expectations with blockchains.
Our research revealed that government organizations are looking at how blockchain technology can positively impact operations in a number of areas. For example, nine in ten government organizations plan to invest in blockchain for use in financial transaction management, asset management, contract management and regulatory compliance by 2018. And seven in ten government executives predict blockchain will significantly disrupt the area of contract management, which is often the intersection of the public and private sectors.
While virtually all government organizations surveyed intend to invest in blockchain by 2018, we discovered a small group of pioneers that are setting a fast pace and new direction with blockchains today. These Trailblazers, 14 percent of our survey, expect to have blockchains in production and at scale in 2017. They are prioritizing blockchains to help reduce innovation roadblocks and inaccurate or incomplete information across their organizations.
Trailblazers are focusing on blockchains to help reduce time, cost and risk in four areas: regulatory compliance, contract management, identity management and citizen services. Additionally, they expect blockchains will enable new business models, particularly in contract management, financial transaction management and identity management. These findings reveal that blockchain adoption is accelerating faster than originally anticipated, with government executives identifying key areas and benefits to explore.
In this report, we share key insights on market adoption of blockchain solutions. We also explore what differentiates early adopters – the Trailblazers – and how other government organizations can benefit from their blockchain explorations.
Distributed ledger technology (DLT), more commonly called “blockchain”, has captured the imaginations, and wallets, of the financial services ecosystem. DLT provides transaction immutability, which is a key requirement for eliminating the need for an enforcer of trust in the ecosystem. Tamper-proof distributed data enables an environment in which trust is not an issue and allows counterparties to operate with a single version of the truth.
Traditionally, asset and transaction information was stored within physical books to independently reference previous actionsinternally and externally. As technologies advanced, physical books were translated into digital ledgers.
Today, every FI maintains its own digital “book of record” repository.
As a result, central intermediaries proliferate in the industry, providing unbiased reconciliation services to facilitate transactions between counterparties without requiring them to trust each other. For transactions executed internal to the organization, reconciliation is performed within lines of businesses.
DLT transformative potential
At its core, DLT is a growing repository of transactions organized in chronological blocks where the technology intrinsically makes changes to previous transactions functionally impossible.
DLT has been designed to replicate data among participating nodes in real time, ensuring all parties operate off of a single version of the truth at all times.
Financial services implications
Challenges information silos between market participants and eliminates the need for inter-firm reconciliation.
Disintermediates central intermediaries and reduces the fear of arbitrage within the ecosystem.
Enables audit trailsto be established for assets and transactions with a significant reduction in disputes.
La Financial Conduct Authority (FCA) pourrait donner des agréments à des entreprises utilisant la « blockchain ». Et si le Royaume-Uni post-Brexit était le théâtre du grand soir de la révolution financière ? On n’y est pas encore complètement, mais Londres s’y prépare. En effet, le régulateur britannique vient d’affirmer qu’il envisageait d’accorder son agrément à des entreprises utilisant la « blockchain » – cette technologie qui fait fonctionner le bitcoin – au cœur de leur activité.