Académique Documents
Professionnel Documents
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The Blockchain
Bitcoin & Beyond
Christian Lundkvist, ConsenSys
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Outline
• What is Bitcoin?
• What is a Blockchain?
• Generalized blockchains
• Smart contracts
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What is Bitcoin?
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Not that!
(Those are metal coins with the letter "B" on them)
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Bitcoin is a specific
application of Blockchain
technology
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What is a Blockchain?
A blockchain is a database with specific properties:
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The Bitcoin database
In the case of Bitcoin the
blockchain database contains
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What is Bitcoin?
• P2P network
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Use Cases
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Generalized blockchains
(Ethereum)
Newer blockchain designs like
Ethereum generalizes the Bitcoin
blockchain. The Ethereum
blockchain includes:
• Arbitrary user-created
programs (smart contracts)
with function interface
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Generalized blockchains
(Ethereum)
Updating the Ethereum
database can be done in three
different ways:
• Calling a function of a
program on the blockchain
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Example: Simple Bet
• Alice and Bob wants to bet on who wins a
baseball game
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Example: Simple Bet
📊 💰
A: Y
👩
Alice uploads a smart contract to the blockchain
along with her bet (Yankees)
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Example: Simple Bet
📊 💰
A: Y
💰 B: RS
👩 👱
Bob makes his bet (Red Sox) to the contract
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Example: Simple Bet
📊 💰
A: Y
B: RS
💰
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Example: Simple Bet
📊 💰
📈
A: Y
B: RS
💰
Win: RS
👩 👱
On game day the Red Sox wins.The winning team is
published on the blockchain by ESPN
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Example: Simple Bet
📊 💰
📈
A: Y
B: RS
💰
Win: RS
👩 👱
Bob calls the contract to claim his winnings
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Example: Simple Bet
getWinner()
📊 💰
📈
A: Y
B: RS
💰
RS Win: RS
👩 👱
The contract calls the getWinner() function
of the ESPN contract which returns Red Sox
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Example: Simple Bet
📊 📈
A: Y
B: RS
Win: RS
💰💰
👩 👱
The contract verifies that Bob is the winner
and sends the winnings
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Applications of smart
contracts
• Auto-settling financial derivatives
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About ConsenSys
• Blockchain Production
Studio
• Developing on Ethereum
right now since most
developer-friendly
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Thank you! 😃
QUESTIONS?
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Epilogue: Mining
• Updates to the database come in blocks
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Smart Contracts for
Compliance
Mike Goldin
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XBRL: The Blockchain Before The Blockchain!
• XBRL aims to resolve many problems that blockchains aim to resolve.
• Open, uniform standards.
• Some automation of standards conformance checking.
• Some automation of compliance checking.
• Blockchains can go further by automating penalties for bad
compliance on the basis of structured data.
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Accountability + enforcement, by example
• Lets look at a very simple smart contract.
• This is Solidity, a programming language for the Ethereum blockchain.
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XBRL + blockchains
• The XBRL you know and love
• Plus the ability for regulators to collect penalties programmatically on
the basis of XBRL data
• Markets on SEC penalty tokens?
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The Landscape for Blockchain Technology
• Campbell Pryde, President and CEO, XBRL US
• Philip Moyer, Senior VP and Managing
Director, Technology, Safeguard Scientifics
• Joseph Lubin, Founder, Consensys
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BLOCKCHAIN TECHNOLOGY LANDSCAPE > APRIL 2016
LedgerX tØ
COINJAR BITSTAMP Product: Bitcoin Product: Debt &
Options Trading Equity Trading
Platform Platform
KRAKEN COINBASE
TeraExchange
Product: Bitcoin Swap
MORE Trading Platform
BLOCKCHAIN
TOOL ERIS
CONSENSYS BLOCKAPPS INDUSTRIES ITBIT
PROVIDERS CHAIN SYMBIONT BLOCKSTREAM MONETAGO Tools:
DAH
(Digital Asset Holdings)
Tools: Tools: Tools:
Tools:
Tools: API’s and Tools for Smart Contract apps Tools:
Tools: Tools: API’s and Tools that API’s & Tools for
Bitcoin API’s & Tools Smart Contract API’s Sidestream Bitcoin API’s & Tools
Ethereum, bitcoin and
are compatible with on Eris software network API’s & Tools for Financial Services
& Tools private permissioned using Tendermint Financial Services
Ethereum using Bankchain
ledgers and Ethereum
compatible
INFRASTRUCTURE
ADD-ON
COUNTER
ROOTSTOCK
PARTY
Infrastructure:
Infrastructure: Smart Contracts
Smart Contracts
INFRASTRUCTURE
(Blockchain NON PERMISSIONED PUBLIC LEDGER PERMISSIONED PUBLIC LEDGER PERMISSIONED PRIVATE LEDGER
Networks)
BITCOIN ETHEREUM HYPER RIPPLE
BLOCKCHAIN BANKCHAIN
Currency: Ether TENDERMINT LEDGER Currency: XFR
Currency: Bitcoin Settlement Process:
Settlement Process: Settlement Process: Settlement Process: Consensus
Settlement Process: Settlement Process:
Proof of Work Proof of Work Consensus
Proof of Work Consensus Ledger Owner:
Ledger Owner: (Proof of Stake) Ledger Owner: Ledger Owner: ItBit
Ledger Owner: All Users All Users Trusted Parties
All Users
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Blockchain Funding Climate
Philip Moyer,
Managing Director Safeguard Scientifics
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Financial Technology Markets
FinTech Funding 2013: $4B 2014: $12.2B 2015: $20B
slide 2
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Blockchain Funding Market
Over $1B in Blockchain Deals
Block Chain Investment Institutional Investors
(in millions)
600 • 177 Unique Investors
500
• Top 10 Most Active Blockchain Investors
400
Investor Deals Investor Deals
300
Digital Currency Group 14 AME Cloud Ventures 4
200
Blockchain Capital 8 Khosla Ventures 4
100 RRE Ventures 3
Plug and Play Ventures 7
0 Coinsilium 3
Pantera Capital 5
2012 2013 2014 2015 2016
500 Startups 4 SV Angel 3
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Blockchain Funding
We are in the infrastructure build-out phase…
Exchanges,
Wallets, $100 $105 Financial
Universal,
Investment by Category $322 Services,
(in millions) $212
$300
Blockchain $$ Investment
$250
(in millions)
$200
Infrastructure
Payment , $159
$150
Processor, Mining, $116
$79
$100 Wallet, 20 Exchange, 35
Universal, 22
$50
Payment
$-
YR 2012 YR 2013 YR 2014 YR 2015 YR 2016
Processor, 23 Blockchain Deals
(in # of Deals)
Exchange Financial Services Infrastructure
Mining, 14
Mining Payment Processor Universal
Financial
Wallet
Services, 82
Infrastructure,
22
Data Sourced From : VentureSource, Crunchbase slide 4
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Examples of Large Blockchain Deals
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James Allen, CFA, Head of Capital Markets
Policy for CFA Institute
Blockchain Presentations
– Nasdaq Linq for Private Securities Issuance
– ItBit Bankchain for Gold & Corporate Actions
– Ethereum Total Return Swap (eTRS)
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NASDAQ LINQ
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THE INFLUENCE OF TECHNOLOGY AND RISK
ON CAPITAL MARKETS STRUCTURES
• Brief History
• Current State
• Blockchain in the mix
• Linq
2
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EVOLUTION OF CAPITAL MARKETS
1969
1970
Rockwell Study
BASIC advocates
Decentralized network of
for Central Securities
1960 - 1970 individual transfer agent
Depository System
depositories (TAD)
PAPER WORK CRISIS
1968 1969 1970
Centralized Arthur Little CCS -> DTC
Securities Study, nationwide American Stock
Depository created clearance and Exchange joins
to facilitate settlement system CCS
immobilization
1980-1990
DTC mergers and
1970 - 2000 acquisitions
EFFICIENCIES THROUGH CENTRALIZATION
1975 1999
Securities Act DTCC, the Commission
Amendment, national system issued an order
for the prompt and accurate approving DTC’s
clearance and settlement integration with NSCC
FUTURE
2008 - FUTURE Markets Everywhere
ENTER THE BLOCKCHAIN
2008 2015
Satoshi Nakamoto First Transaction on Nasdaq
published the Linq
seminal bitcoin paper Announcement of Proxy Voting
49 of 136Increased Traction in
THE WORLD
TODAY
CENTRALIZED CORE
MULTIPLE
INTERMEDIARIES
SILOES OF
INFORMATION
PAIN-POINT -
RECONCILIATION
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WHY IS BLOCKCHAIN RELEVANT FOR CAPITAL MARKETS?
A DIGITAL ASSET = A DIGITAL BEARER TOKEN
Bitcoin Exists
Currencies
Securities Emerging
Commercial IOUs
Brand/Loyalty Points
Etc..
Source: chain.com
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WHERE DIGITAL ASSETS GET THEIR VALUE
Source: chain.com
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HOW IS BLOCKCHAIN DIFFERENT?
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Programmable
“smart contracts” enable
complex transactions
Source: chain.com
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LINQ ARCHITECTURE
TECHNICAL INNOVATION IN PRIVATE SECURITIES
Issue Investor
rs s
9
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NATIVE ASSET ISSUANCE
FOR EACH CLASS OF SHARES
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FULL REGISTRAR RECORD KEEPING
EQUITY TIMELINE
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AUCTION-BASED ORDER MATCHING
ALL POSITIONS VALIDATED FROM THE REGISTRAR
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TRANSACTION EXECUTION
A SINGLE BLOCKCHAIN TRANSACTION REPRESENTS A MANY-TO-MANY TRANSFER
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TRANSACTION EXECUTION
COMPLETE TRANSACTION-BASED AUDIT TRAIL AND CHAIN OF CUSTODY
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INVESTOR VISIBILITY
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BLOCKCHAIN BACKED RECORDS
EACH RECORD OF OWNERSHIP BACKED BY BLOCKCHAIN TRANSACTION
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IN-SYSTEM CONTRACT FLOWS
REDUCE ANY POTENTIAL FOR DOUBLE ENTRY OF INFORMATION
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NASDAQ LINQ AS A PLATFORM ACROSS ASSETS
Given the platform capabilities, Linq can become the foundation to support a wide variety
of asset types and market structures.
PLATFORM CAPABILITIES
Issuers Investors
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T+0 Delivery-versus-Payment Settlement
for Gold and Listed Securities
1
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What is Bankchain?
2
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Bankchain’s Regulated Infrastructure Connectivity
Trust Charter From
the NYDFS
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Ledger Landscape
Trusted Financial
Permissioned
Institutions
Distributed
Databases
Private
Trustless
? ? ?
? ?
? ?
?
4
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Architecture
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Bankchain’s Native Tokens
Overview:
Tokens are digital representations of assets which convey a
perfected interest in the underlying security.*
Primary Types:
Owner = itBit Trust Company
● Asset Tokens Beneficial Owner = Alex
Last Traded = 10/28/2015
● Cash Notional Tokens Certificate
Mutable
Active Smart Contracts = N/A
● CUSIP
- Issuer = IBM
Characteristics: ● ISIN Immutable - ISIN = US4592001014
● SEDOL
● Enhanced Database Entries ● Issue Date
- Par Amount = $1
- Listing Location = US
● Par Amount
● Valueless - Settlement Location = US &
Canada
● Unlimited - Issue Date = 10/28/2015
Messaging Layer
Clearing / Matching Trades
Fund Verification
Messaging
Netting
Consensus Layer
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Trade Validation (for OTC Transactions)
No Matching Instructions
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Settlement and Funding Flows
4. Creating DvP
1. Trades Entered 2. Trades Matched 3. Funds Transfer Consensus Release of Escrow Settlement Finality
Position
Escrow Escrow
Escrow
Confirmation
Seller Sell
Receive $ Sell Sell
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Next Generation Sub-Accounting
Hierarchical Seed
Deterministic
(HD) Wallets Master Public Key: Can view all
holdings in underlying accounts
Master
Master Private Key: Can control all
holdings in underlying accounts
Child
10
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The Bankchain Advantage
● Risk Mitigation and Next Generation Analytics
○ Increased transparency
○ Regulatory adaptability
○ Stability via the distributed ledger system
○ Trusted network of permissioned participants
○ Full inventory control
○ Real-time credit tracking
○ Perfect asset provenance
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Current Market Landscape
● Wide recognition that infrastructure needs to be improved
● Concern about transparency / liquidity / cost: LBMA RFPs
● Potential for the fracturing of the market: WGC and other initiatives
● Our proprietary RWA study: for every $100 worth of an unallocated gold
balance, a participant is charged approx. $1.20 for capital usage
● London’s clearing and settlement service to global participants constricted by
London business hours
● Buildout of competitive Asian infrastructure
● Departure of trading houses (Most recently Mitsui)
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Challenges to Today’s Infrastructure
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Features & Benefits of Precious Metals on Bankchain
FEATURES BENEFITS
Automated DvP for the first time in the gold market Risk reduction
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Envisaged Strategic Solution
Dealer
T Shared Services JV
R Federal Reserve
A Spot Settlement Matching
Dealer D
I Position Validation
Bullion Depositories
Dealer
Trade
LBMA
Reporting
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Allocated, Unallocated…or the best of both?
Our joint solution marries the best qualities of allocated and unallocated for the
wholesale market
Leveraging these best qualities will strengthen London as a clearing and settlement hub
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Fractionalization
Intra-settlement cycle participants can At the end of settlement cycle, the bars
own fractional positions in numerous are reconstituted to consolidate
gold bars positions back into whole bars
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Reduction in Capital Charges
Bankchain will reduce/ eliminate credit risk capital charges associated with unallocated gold, increasing
profit by ~1.2% of unallocated gold assets
Unallocated Bankchain
Asset Liability Asset Liability
$100 unallocated $100 unallocated $100 allocated $100 allocated
loan to dealer deposit from (RWA = 0%) deposit from
(RWA = 100%) customer customer
Equity Equity
~$13 capital for ~$0 capital for
unallocated gold allocated gold
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Future-Proofing of London Clearing
itBit proposes an evolution of traditional settlement by keeping key benefits,
eliminating risky weaknesses, and adding potent attributes.
● Bankchain enables the market to trade with the ease of unallocated while settling
with the safety of allocated.
● Our solution reflects the increasing preference for allocated storage in recent
years, which addresses increasingly important credit and balance sheet
concerns
● Allocated storage is approaching unallocated rates, minimizing friction between
allocated and unallocated.
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A Game Changer for the Front Office
• Lower credit names that otherwise meet account opening standards can
be serviced with Delivery vs. Payment (DvP) and same day settlement
(T+0)
• Residual arbitrage positions from these trades provide “an ax to grind” with
other clients - increasing trade velocity and profitability
• Revenue growth in other business units (Advisory, etc.) from these new
relationships
• Solve for customer risk by innovating solutions using Bankchain tools
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Next Generation Operational Efficiencies
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Opt-In T+0 Listed
Securities
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Listed Securities DVP on Bankchain
Overview:
Bankchain can provide near instant clearing and settlement for all listed securities by integrating the
current financial infrastructure with next-generation distributed ledger technology.
Advantages:
● Near instantaneous settlement finality
● Increased liquidity
● Full automation
● Big data analytics
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The Architecture of T+0
Achieving Same-Day Settlement
Bankchain offers participants T+0 via the use of “Master Account Structure”. This new entity will be
created within the DTC and designed to hold and manage listed securities. These securities will then
be tokenized and traded on Bankchain.
In choosing to make use of the “Master Account Structure”, participants would be opting into T+0. With
this comes the advantages of:
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Tokenization of Listed Securities
Deliver free with beneficial owner details
Atomic Transaction:
Upon receipt of securities at
ETF
ETF
DTC, Bankchain utilizes smart
Shar
e
Bankchain Participant Beneficial Owner (BO) contract (SC) capabilities to
create and populate participant
and beneficial owner (BO)
accounts with tokenized shares
ETF
ETF
Shar Bankchain Participant Bankchain Participant 2
e
Encumbrance of shares
BO Participant
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Bankchain as a Settlement Location
Trades matched and agreed
Counterparty 1 Counterparty 2
DTC
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How the Trade is Made on Bankchain
Participant places block XYZ order BOs place orders
with Exchange member(s) for XYZ shares
SC SC BO3
1 2
SC2 - BO allocation and settlement can occur
with the Participant re-allocating XYZ shares to
Participant Escrow BO1 Escrow BO2 Escrow BO3 Escrow BOs’ accounts, free of payment. If
BOs’ custodians are on Bankchain,
DVP settlement finality between participant and
SC1 - Escrow account holds participant's cash notional tokens representing cash and Accrual BOs’ custodians by instructing NSS is possible.
tokens for shares due from the counterparty. When all assets are in escrow, settlement occurs.
Via SC2, the Participant can further allocate the delivered block of shares to its beneficial owners.
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Corporate Actions API via XBRL-Tagged ISO 20022?
BUSINESS STANDARDS
Business Facts
Standard
XBRL XBRL
TAXONOMY
(data XBRL Instance
dictionary,
Examples:
metadata)
= Business
Reports
IFRS, US GAAP, JP GAAP
UK HMRS, US FDIC,
US Corporate Actions
INTERPRETATION
Features: machine readable,
structured, comparable,
analyzable, consistent, DATA
verifiable, usable data
RE-ENTRY
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Bankchain will automate, accelerate and enhance post-trade processes
across the financial services industry, saving institutions time and money.
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ConsenSys Blockchain Highlight Use Case:
Ethereum Total Return Swap
James Slazas
– ConsenSys Head of Capital Markets
– James.Slazas@ConsenSys.net
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Agenda
• Ethereum
• Ethereum eTRS/Collateral Management
– Blockchain Core Components
– Step by Step Demo
slide 2
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General Purpose Computer
There are 5 interacting technological elements that are common between the Bitcoin
and Ethereum Protocols.
slide 3
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Ethereum = Smart Contracts
When we speak about smart contracts on the blockchain, we are talking about
the Ethereum blockchain.
slide 4
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Ethereum’s History
Nov 2013 Vitalik Buterin releases the Ethereum blockchain White Paper
Jul 2014 Ethereum crowdsale raises $18M worth of BTC for development
Jan 2016 40+ banking consortium used Ethereum to transfer digital assets
slide 5
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7 Months After Launch…
Price:
~$12.50 (up from $0.30
at genesis sale)
Monetary base:
~ $1,000,000,000
slide 6
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Types of Blockchains
PRIVATE PUBLIC
Permissionless
A B Network
slide 7
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Technology Stack
slide 8
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Use Case: Core Components
● uPort-Digital Identity
○ Attributes-information controlled by individual
● uPort-Reputation and Persona
○ Attestations-information others have said of the
individual
● Oracles for Pricing and Reputation
● Balanc3-Triple Entry Accounting
● eSign-Smart Documentation Management
● Digital Assets
● Smart Contracts
○ Business processes
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1 Access uPort Wallet
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slide 14
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1 Oracle for Prices
3 Triple Entry
Accounting
2 Collateral
Rebalancing
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2 Collateral
Rebalancing
2 Reputation
Downgraded from 79
1 Oracle for
Reputation
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1 Triple Entry
Accounting
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Use Case Benefits
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James Allen, CFA, Head of Capital Markets Policy for
CFA Institute
Blockchain Industry Panel Discussion
• Steve Wager, EVP, Operations and
Development, ItBit
• James Slazas, CFO, Consensys
• Alex Zinder, Senior Director, Corporate
Solutions Technology, Nasdaq
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Smart Contracts
1
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Smart Contract
Fundamentals
2
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Smart Contracts
● Predetermined logic
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Example
4
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Example
5
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Why Smart Contracts
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Smart Contracts vs Automation
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How Smart Contracts
Work
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Example Smart Contract on a Blockchain
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Applications in Financial
Services
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Oil Options Contract
● Margining
● Automatic Exercise
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Repo
● Ensures compliance
Reference
Data
● Provides DvP
Code / Logic
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Data Standards
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Reference Data / Oracles
Most smart contracts rely upon oracles for external data in order to execute upon their programming
Oracles Contract
Data
Pricing MRA
Etc. ICSA
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Defining Contract Components
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Risks / Outstanding
Issues
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Smart Contract Code Hierarchy
Legal framework
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Risks and Outstanding Issues
●Smart Contracts: a runaway train?
○Gate checks
○Optionality
○Reversibility
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Future of Smart
Contracting
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Future of Smart Contracting
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Questions
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