Blockchain in Financial Service – I Payments and Secure Trading

Blockchain in Financial Service – I  Payments and Secure Trading

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Hello. Everyone and welcome back to, our lecture series on, the blockchain course, architecture. Design in use cases, we. Are now going, to dive into the financial services, industry and, why. People. Think it's routine is going to completely transform the face of how financial, services, work today so. We're going to look at three lectures, looking, at different use cases so. This lecture is going to be focusing. On just payments, and securities, trading so it's one aspect, of financial services we're gonna look into today and how. Blockchain. Can completely transform, this landscape, and how what. Are the existing pieces of work who who's working, on this what are they doing and gives. You a sense, of where we are and how some of the first production networks, are coming out in this in this in. This area cross-border. Payments so, this is, the classic use case for which Bitcoin, itself was created and you. Could call it the Holy Grails of cryptocurrencies, so. Today we. Have over, a thousand, five hundred crypto, currencies, a huge, number of them providing. Various, different, kinds, of concepts, there are a lot of AI CEOs coming up this is the initial, coin, offerings, there's. A whole lot of activity here, is a lot of startups, lot of venture. Capital, funding in the space I would. Really call this this completely, this. Is. Too much action going on for, any person, to even follow but. What is really a currency, right I think we, should have we should step back and take a technical, look at whether. These crypto currencies are really currencies. In some way in, economics. A currency, has, to follow the following criteria and, only, then was actually accepted as a currency today and in for regular layman, a currency. Is something like like the Indian rupee or the US dollar or the euro, they. Are all currencies, but why do we call them currency what are the some of the properties that all of these satisfy, for. Them to be accepted as a currency so first is it, has to be a medium, of exchange so. In, some sense what this means is are, their merchants, today who are willing to accept the currency, in exchange for goods and services can I go to a shop or can I go to an online, where, I pay. In, INR. Today that's true for Indian rupee it's true for USD I can, go to our shop how. Can I can buy our TV in. Exchange for Indian, rupees now, that is a medium of exchange where there, is an exchange of goods so, a seller is selling a set of goods or services to, a buyer and the, buyer pays, in, terms of this currency right, so, that's a medium of exchange and that is important, so merchants should be willing to accept this currency in the Bitcoin world yes, there are a few very limited set. Of merchants, who, are accepting. Bitcoin today as a, medium of exchange but. In many countries the. Government has actually banned the, use of Bitcoin. Or any other currency has. A medium of exchange there, are many reasons for this maybe if we've already covered that some. Of the operational. Issues some of the technology, issues with with Bitcoin and other, cryptocurrencies why. People, are not recognizing. This as a medium of exchange so. My, vote on this would be Bitcoin. Satisfies, this criteria of, only, partially, there are very few merchants, today in the world who, would accept Bitcoin, in exchange, for goods and services so, that's the first criteria, the second criteria, again an important, criteria, is that it has to be a unit, of account so. What does that mean what. It means is that is, it a measure, of real, value, of goods and services so. Today, if. I go to. Let's, say a store. I want to buy a television the price would be you'd say okay maybe it says 10,000, rupees I'm just going to take it as an example the. Television, is tagged as 10,000 rupees and the, value of that 10,000, rupees is, typically, independent. Of the. Value of the Indian rupee itself, so, you know that Indian rupee right. There are exchange markets, that would price the Indian rupee with, various, other currencies, for instance conversion, with the US dollar or the euro so. That rate, changes. On a daily basis actually you know even intraday right. The value of the repay rupee keeps fluctuating, but. Just because of the value of the rupee fluctuating. The value, of the good that you pay for is, not fluctuating, you are always whether. It's you go today or tomorrow, gonna be 10,000 rupees there might be other reasons why the price, changes, there might be inflation. Over three months that, 10,000 makeup may become 11,000 but that is not what we are calling called taka talking about here regardless, of the fluctuation, and currency is what I pay for a good or service is that, the same right so that is the real value of goods and services that.

Is What we call as a unit of account and, for, almost every, cryptocurrency today I would say that it actually fails, this criteria, today people even merchants, are willing to accept crypto currencies in exchange for goods and services but the, amount, of cryptocurrency. There they accept, they, would actually do a conversion, factor with, how its trading with let's say the USD say today let's say Bitcoin is trading, at eight thousand dollars you might say I will, accept so many bitcoins in exchange for this service but, let's, say the Bitcoin price goes to nine thousand, or seven thousand they will adjust it to, match the USD, price so they've actually have a USD, price and that's the real value and. Bitcoin is just a medium of exchange in that case it's not a unit of account so it, has to be independent of fluctuation. And currency and that's, when it will be accepted, as a unit of course so, merchants. Should be willing to accept, let's, say I put, a price as two bitcoins it. Has to be two bitcoins, regardless, of what the price of Bitcoin is relative. To other currencies that's, when it's a unit of account and the third criteria, is is. It a store of value today, if you take for instance gold, I would. Say gold is a store of value people. Are willing to invest. In gold as a. Trading instrument so I could park some amount of my the, currency that I have I can exchange it for good alright, so gold is a store of value this, is almost never a media firm medium of exchange today, if I take some gold coins and try to buy a television it's. Not, possible a merchant is not gonna accept that right, but it is a store of value right. So that way gold is a mode of investment, and all. And today's, world actually trade is treating cryptocurrencies. More. A store of value than, of anything else right, it is a more of investment, may be speculative, investment, they, they, speculate, that the value of these cryptocurrencies, will, will rise over time and so, investing, in it in in buying those Krypton's cryptocurrencies, so. This. I would say the cryptocurrency world, today is, actually, satisfying. The store of value criteria. For a currency, it. Almost never satisfies, the unit of account, criteria. And maybe. In some cases satisfies. The medium of exchange criteria, so, I would say until it satisfies, all of these criteria it.

Is, Not going to be called, a currency, in the true sense at least in the sense that economics, economists. Think, about it and that, also may, be a way to explain, a lot of the hesitation. To to get into crypto, currencies that learn there are a lot of people have shown later. I hope this gives you a perspective of, what we mean by currency, and what it means to exchange. Currency. For goods and services and that, is the core of payments, right you, need this kind of a currency that satisfies, these properties to, be able to do payables so, we look at a few networks. Blockchain. Networks or disputed. Ledger networks, that, are all payment, networks in some sense or primarily, for the purposes of payment so, the first one we look at is called, the stellar protocol, and they, have a network running, it's a global network it's actually a decentralized. Hybrid, blockchain, platform, with, open membership so, what this means is anyone, can join this network run a stellar node and they. Can be a participant in this network execute. Transactions, and and store the state of payments. Or accounts, in this network and they, have a cryptocurrency called, lumens right. And that is the native asset on which trading, happens on the stellar network but what I like about Stella really is the protocol that they have they. Have a federated, Byzantine. Agreement, protocol what is fed rate what what is this mean and there was also a term hybrid here, that I didn't take didn't explain properly so. Although this is an open membership where, anybody, can join what. Happens, is the way consensus, happens on the network is actually happening in two layers the. First layer is, is. Creating. A set of chorim's or a subset, of these nodes in some way some way amongst, this large set of nodes so it's a there are thousands in the network I can. Break these up into smaller, chorim's, be, current, business agreements, of the participants, and within each quorum, there is going to be a Byzantine, agreement, there's going to be a bison time algorithm. That happens and that, Byzantine agreement, if you think, about it Iza is, something that runs in a closed network so within that set of small subset of nodes they are going to execute a Byzantine fault tolerant as good but that, happens. Several times over several of these forums across the network and many of these columns can also intersect, with each other they will in fact interests intersect with each other and the. Higher level, protocol, will, ensure that everyone. In the network sees a consistent, state so it's almost happening, at two levels one is at the breaking things down into quorums agreement. Within, each quorum and then agreement, at the overall network level so it has a it, has good properties it has two, two to five second transaction clearance, so when, I submit our transaction, for a payment on the standard network it, will pass, through in two to five seconds that's, not too bad for a blockchain, platform. It's still not at the level of let's say a Visa or a MasterCard Network. Where I can swipe a card it will get and, get through in a fraction of SEC's fraction, of a second but, it's still it's still reasonable, reasonable, I would think what, did the network itself is formed by a set of anchors, or the actors bridges, that, I love, you to convert, existing, currency, so you can convert US, dollar to to.

Sinner Lumens right, and then the lumens pass across in the network so. That, these actual, actually actually act as the, currency. Converters, and, internally. It, also has a distributed, exchange so, let's say me. Sitting in India I want, to transfer, money, to somebody, in the US in. US dollars, so what the stellar network will do is I ask, stellar, to transfer, let's, say $50, the. Standard will tell a network we'll figure out what is the best way to convert, Indian. Rupees to in. This case let's say euros, rate so, what is the best way to convert from one currency to another it. Might be because based on how the network is created. What there might be a direct conversion available, iron or two euro or it, might be INR two USD, USD, to Europe right that, is possible but, all that is happening automatically. Within the network it will be converted for you at the lowest rate that's available so I'd encourage you to look up stellar, it's a very interesting project and, they have a good, set of people on board using, that network so another interesting project is the ripple protocol, and the associated, network actually, stellar. Was a spinoff from Drupal so Drupal was the first one that came out in terms of being creating a such a payment network I would say after Bitcoin, and stellar. Razón, offshoot of ripples so they broke away from ripple so it's a protocol, that instead, of end-users they actually look at banks they, target, banks to help banks do, clearing, and settlement of payments, and it's, done in a decentralized manner they, have their own consensus, algorithm again, it allows exchanges. And, remittance to happen and, they. Also have a similar transaction. Clearance they have about five seconds to run their transactions, but important thing is there is no mining, in this case unlike. Bitcoin. Right so Bitcoin has proof of work and it involves mining but, here they are only looking to create that network among a set of permission. Entities, or banks and they have a custom protocol, but, that protocol, unfortunately, has no one has validated, it for correctness and fault tolerance so, it's still being debated whether it's. A it's a good protocol, to use they, have again similar, to stellar they have gateway nodes to current to convert, currencies from, from, fiat currencies that's like the US dollar or euro to to, ripple and for, rupal it's the XRP that's the crypto currency that they use and, they. Have market makers that help convert one currency to another and, unfortunately, ripple, has a centralized, governance, model so tuple controls, who, joins the network how is this created. And so on and they also hold a large fraction, of the crypto currencies still and the last I saw they were holding about 60%, of all X RP which is a bit, of a concern because people are, worried that they, can manipulate how.

The, Price of x RP using, the large pool of currency, that they that they hold with themselves so that is ripple again an interesting protocol, from a T so technical, standpoint it's an interesting one to look at so, I would encourage you to look up look up ripple so apart from these networks, people are looking to build permission. Works for payments, and settlements, so. If you look at the current way, in which the. World, operates today for payments it, actually happens, through a very complex, set of correspondent. Banking, agreements, so. Today if I let's say I am, to send. Money. From India to the US then. I will ask my bank to send, money. To my friends, bank in the US and the. Way it will work is there'll be a set of banking arrangements between, my bank and the u.s. bank either directly, or through intermediate. Banks and. All through all this happens, to through, what is called nostril, wastrel accounts so. What are these rates on Ostrow is a Latin, word which actually, means ours so. It's really loss, to account is let's, take a particular bank rate let's take banking, on Ostrow. Account for Bank a his bank is account, in Bank B so. Bank a holds an accountant Bank B and, likewise, a worcester o account is your cot so, Bank. A will hold an account for Bank B so it's, a correspondent. Agreement a has, our account would be B, has an account to thing from bankers, terms that account in B is called death nor stroke on Bank B's account with them is called there was draw a cut so, this. Is used now, primarily because Bank, a and Bank P might, be trading in different currencies so bank a might be using INR bank B might be using USD, so. Bank the A's account, with Bank B will actually have its balance in u.s. dollars so, that allows, it to you to perform transactions. In, the native currency of, the other country, so those not sure what straw accounts are helpful for them now, people are looking to put some of these kinds, of accounts on blockchain, all right so, with blockchain, again we are only going to have the set, of member entities, above set of permission set of banks participating. In, this network and all, transactions. Can be held private, and confidential to, the transacting, entities and what. Blockchain, helps bring about is. Completely. Eliminate, the need for reconciliation. Or, errors, that might crop so today the way the most robust, of banking accounts work is let's say there are hundred, such people from Bank a transacting. With Bank B likewise, there may be two people from bank be sending. Money to banking all of these are are netted, together so in some ways they're all accumulated. And together they, will determine what, is the exchange between Bank a and Bank B at the end of the day in some ways it's like the RTGS, if you're familiar with real-time, gross, settlement so, did, we have it in India as well it's, a popular way of exchanging money in some ways it's the same thing as that but it can significantly help, reduce, the cost and delays involved, in clearing. And settlement of payments in these in these networks and the other advantages.

Let's, Say the treasury is part, of this ecosystem, then they have an instantaneous, view, into, the currency position, across, all the accounts so I can, immediately see, how much INR, is held in in US, banks in US Dollars and vice versa, so it gives you an immediate instantaneous. Or almost a real-time, view of currency. Positions, in various banks, across the world and likewise it can the resolve bank if they are part of this network they can use all of this information to, do some of their policy, management right so monetary, policy, is determined, based on how much liquidity is there in the market how much cash, is flowing around so all of these the, Reserve Bank can can have a clear view into all of this if they are also on the blockchain as maybe an auditor right, they may not be transacting, on the blockchain themselves, but the visibility, helps, them and it can also help increased, compliance, and security so, making sure there are only legitimate transactions, there, is no money laundering that is going on all, of them you can get a real-time, visibility into, those transaction, so those are the key benefits of bringing this into, into, blockchain so I'm gonna take one specific. Application. So this is actually a project. That was initiated by. The Monetary, Authority of Singapore this, by the way I am grateful, to them for some of providing, some of these slides so the Monetary Authority of Singapore is, the central, bank in Singapore so the currency there is the Singapore dollar SGD. And that, this project, Obon is about, bringing, the Singapore, dollar onto, a blockchain platform, onto a distributed, ledger so. What does this really mean so they want to experiment with trying. To bring the Singapore dollar as a virtual, currency on, blockchain, so. This is over and above the, physical currency that is actually, transacting, in Singapore today that, people might have, physical cache they are trying to bring Singapore, dollar as a virtual, currency on a blockchain platform, it's an experimental, phase of course but it's a very welcome step and many other central, governments, are looking to do the same and by, the way the Indian government the RBI has also issued statement saying it is exploring, some of these applications as, well but, Singapore, is always at the forefront of innovation so they are already trying this out so the fair face one of this of this project, Rubin is just handling domestic, payments within singapore itself using, the central, bank issued, SGD, equivalent so I said this is a virtual currency is an equivalent, of the SGD today and they are testing it out so the first phase of the project was implemented. On a theorem which, is another blockchain. Platform these are some of the things that they try to do what are some of the functions they try to do is bridging, collateral, for, depository, receipts I am NOT going to go into the details of some of these financial, terms but think of it as just payments. In some ways and there are many instruments, of payment so some of those they tried to do it on watch it and it was trying to explore. Connectivity. Of existing. Banking systems, with the blockchain how, does that work what is it what do the banks have to do to connect to the blockchain to, exchange payments, on blockchain right and it also looks at connectivity, of the current mas. Electronic, payment system so they have something called maps and they, were trying to connect that system, with, blockchain, so that was the overall scope of phase one and this is a high-level architecture of. The, phase one urban project itself so I'm just going to look at I'm not going to go into too many details but, I think the key takeaway, is, that the blockchain, is going to be only a part, of the solution like I mentioned before there are many other components, that you have to integrate with so you'll probably have to integrate with the bank's existing, systems, their web interface, for banking. Employees, to be able to access this should, be made available so, if they make a payment from their existing UI, it. Should then get connected to, bank, the the backend bank systems, and then connected, to the network blockchain, network itself and of course mas needs to connect to this to see what transactions, are going on so mas has a portal, for. Seeing what transactions, are there and of, course the payments themselves have to move around so how, the how, do connectivities are made all, of those have to be figured out so, there are really many off chain components, beyond, just the block chains of blockchain maybe 20%, of this entire architecture, but, there are many other things that you need to be taking, care of to, bring the whole application alive.

And Actually, being able to do even, something like payments, so phase 2 of the project they, are going taking it a step a, notch further they, actually now have 70 plus project, members there are M or, 10, or 11 participating. Banks today some, some big names in there they're all trying this out on. Blockchain and there, is the Monetary Authority of Singapore as. Well as the association, of banks of banks, in Singapore and the, Singapore Stock Exchange so all of them are part of this this ecosystem, now trying testing, the waters and there, are five technology, partners Accenture, consensus, IBM, r3, and Microsoft, so these are the technology, partners, and, what they are doing is they are implementing. This kind of a payment application. On three, different platforms so they're implementing, it in Ankara. Hyper ledger fabric in Coram so we looked at hyper larger fabric in detail later, in the course we look at a briefly, we look at probably Coromant corner as well so these three platforms were evaluated. For, the payments application, and there were multiple banks, that were participating in this and there were many tools that were used and there were many learnings, from this exercise so, it is it is I think the project the phase two just got completed and they're, really looking to ramp up to future phases going. Forward what were some of the learnings I think one, of the learnings was that there's actually a trade-off, that you need to be aware of right, one, is on one side resiliency. A centralized. Counterparty, let's say mas previously. Was handling all the all the block all the transactions, all the payment transactions, but, then it makes you made sure that if if that the, resiliency, was limited only one node was was, one, organization. Was doing that or that side that is privacy, which, is who can see which transactions, in the current. World when. You are. Relying. On a sent one central, counterparty, which is this end of the spectrum what. You get is you get privacy no, one else can see which which transactions, you perform so you get privacy and, you, also get liquidity, I'm not going to go into the details of this but, it allows you to maintain, a low liquidity to be performing, these, transactions, so you don't need to have a high, high amount. Of currency, in, hand to be participating. In this so that's what is the case within the current centralized, system you, get privacy, and liquidity but, you don't get resonance, resiliency, if you are looking to do all participants. With full visibility, of all transactions, which is how it is with in the Bitcoin world or in the etherium world everyone. Can see all transactions, that are going on in, that case you get resiliency, you get liquidity but, you don't get privacy right, so that's the trade-off but if you're doing let's say a permission like Network like hyper let your fire break or corner you can do gross settlements, only so you can get privacy of transactions, because these platforms, support privacy you can get resiliency, because it's still a decentralized, system multiple, nodes are executing, these transactions, there is problems with liquidity so that's what they realize so there's actually a trade-off between what. You can get and they're trying to see if this trade-off can be resolved somehow whether some of these platforms can give you a mix of everything right, a good mix of all of these properties so I'm. Going to go over this side slide quickly right in phase two some of the things that they are looking to get is, of course digitization, of payments you. Want decentralized, processing, so you just don't want one node to be doing the clearing and settlement you want all the nodes to be involved. In that and you, want to do that in a decentralized fashion on blockchain you want privacy of transactions, so only the participants, of a transaction should be able to see what the transaction is about you want settlement, finality which. Again is not there in the Bitcoin and aetherium world because, they use proof of work and that could be Forks, it's, actually pause you might not know immediately if you are transaction, is final it might take maybe even and not for, you to see, whether your transaction, is final and there's also liquidity opt optimization.

Which Is on the financial, side okay, so that was project, open I hope you got a flavor of some of the real, assessments. That are going on for building some of these production, grade networks. Especially for, payment so hope, you got a flavor of that now, we will go to slowly transition towards. Some of the securities, trading, aspects for, capital markets in some sense capital. Markets is probably, the, biggest in. Terms of monetary, value the, be the biggest transformation. One could think of in the that blockchain could come about people, are trying to to, test the waters with small, use cases today if. You wanted to bring the entire stock, exchange on blockchain that is not feasible today I would in my opinion because. The scale is just way to do, big block chains not mature enough to handle that but. If we can scale, up to that there are significant, benefits to. Bring in bring in some of these securities. Trading onto blockchain so, what are some of these things that are being done one, use case is on commercial, paper great, Saudi so, what is commercial paper so como commercial paper is again a trading instrument. Organizations. Routinely. Come up with commercial. Paper so, this is a kind of an agreement that they say this like an IOU they, sell this commercial paper in, exchange for money in. Exchange for some amount of investment. And, one. Commercial, paper can be bought by multiple people so let's say I release, a commercial. Paper worth hundred thousand dollars I could. Find em participant. And other organizations. Willing. To pay $10,000. Each to buy, that commercial. Paper so each each of them buy a portion, of the commercial paper and together that commercial. Paper is then issue. Now. What, happens, is the commercial paper has a certain. Time. Period for which it's it's valid at, the end of that time, period the, borrowing organization. Will repay all the. Initial. Investing. Organizations, right. So when they repay they of course repay with a certain, interest. Associated, with that commercial paper this, is standard, practice in. The in, the in the enterprise, world today and. Enterprises. Exchange these commercial, papers or not wrote in basis so, today this, process, is extremely manual. There, are many intermediaries, that are involved, that that, make this system. Possible and this, this top-level, picture, shows, the current, state of how commercial, paper works today a potential. Future State this, is not a reality today people are, investigating. This there are some proof of concepts that have been developed. Potential future state is to bring some.

Set Of these entities onto, a blockchain platform, where, they can get some of the benefits, of automation so you can get, away from some of the paper exchanges, that are being made today you, can get to automation, you can improve, the efficiency of these processes, you. Can improve transparency and, immutability so. Today there could be discrepancies on. As to let's. Say when, the actual paper matures, when how much interest needs to paid be, paid there might be discrepancies. And there's also high volume right so because of that there could be discrepancies. Because, people are manually noting down some of these details and hopefully. Because of these improvements. You, can bring down the cost of issuing, some of these papers, commercial, papers so, that's one use case where the octane is being, actively. Investigated. So securities, trading like I mentioned is is, again a important. Area, where blockchain, is being applied so. Today, IBM, is is working with both Japan, Stock Exchange London Stock Exchange and. Many other entities to actually do some of the post, trading settlement, so what does that mean so, let's take this picture this kind of describes. Some, of the entities that are involved, how they are actually participating in securities, trading the. Stock exchange, so there of cornets first, stock there is a purchaser, and there, is a seller, typically. They do both of them have a custodian, that they work with these might be service providers, these are organizations that, manage, the, stock, holdings, of the seller and the purchaser, now, the stock exchange, is, responsible. For matching. Bids so. The seller will say I am willing to buy a particular, piece of stock at this price the. Purchase sorry, the other way around the purchaser, says, I'm willing to buy this. Stock at this price the, seller will say I am willing to sell the stock at this price and, the stock exchange will match these bits so that's what the stock exchange does, so there are brokers, in between that, get, the sellers and buyers the, best deals possible there. Are market makers involved and. The. Clearing house the clearing house is an important, entity. That. Is responsible, for validating. These, transactions. So for instance it will validate I'm just, going to make it up they, gonna validate whether the, seller actually has the stock to sell, whereas. And likewise does the purchaser have the money to buy right. And, the. Clearinghouse also, does the the function of netting what, the netting is the seller for, instance might be doing multiple transactions, each selling, some amount of the stock or, they. Might within, a day also they, might be selling and they might be buying again so. All of these are all, compacted. Together and at, the end of the day they will resolve, and say this, is the net result saying. A has purchased so much talk B has sold so much talk they. Have looked at all the transactions, combine them together to look at what the final balances, should be right, so that is the job, of the Clearinghouse that is also a settlement, phase so, there is a settlement, phase, which is basically. Actually. Execute, the, final, state so you actually go and set the final state of all holdings. To, there to the correct numbers there, are security depositories. That keep track of ownership, of each stock how how much each. Who. Owns which talk and so on right so all that is is being cut so you feel think about it is a very complex, ecosystem. Of participants, each, performing, a different function in. This ecosystem and. There. Are a lot of an inefficiencies today. And there, are mistakes that happen that need to be manually resolved, and. The. Hope is with blockchain, some, of these processes can be automated can, be made more efficient, and reduce. Cost and time for settlement so, this is again just a life cycle I'm not going to go into too much detail so the, clearing like I mentioned they're going to be multiple, transactions, that are submitted, these, transactions. Are all batched together maybe. At the end of a day it, could be at sub other intervals, as well but let's say at the end of the day they are all batch together they, will the Clearinghouse will then determine what is the net settlement across, all of these entities who. Owns how much of what which stock at it at at, that time so, now the Clearing House is a centralized, entity here and then there is a settlement house again as I'm toys in Turkey today which. Is going to figure. Out which, is auto execute. These transactions. In that, occurs across. A batch and say okay this is the final value for, all of you right for it every participant, and. Today. It happens T plus 1 so T plus 1 is today the trade happens today the.

Clearing Will happen the next day and, settlement, might happen 3 days from now some, countries follower T plus 3 crates a life cycle some of them follow t plus 2 some t plus 1 it, depends based on country but roughly the process followed in the stock exchange, and post trade settlement. Follows this life cycle so. We want to bring this process, onto, a blockchain network, where, you can provide some of the same transaction. Properties, along. With privacy that's needed and improve. Efficiency, Automation. Visibility. Into what is happily happening right, and, people. Are because the volumes can be really big people, are trying to do. This in some of the low liquidity markets right so these, are some of the benefits that I mentioned, reduce, the settlement time reduce the risk of settlement, what if something does not happen, right a transaction. Does not go through there. Is a certain risk that you are you're incurring so. You are trying to reduce some of those risk so. People, are trying out with low transaction, volume markets. Rather, than going to the entire trading. Volume people, are just, testing waters I would say at this time there's also the the, area, of private, equity so. There are certain. Companies that are not publicly, listed in the stock exchange but, they do have provider, notion of equity and ownership, and, different. People organizations. May be owning different, amounts. Of equity with, a private. Company and today. There is a whole. Ecosystem and, infrastructure. That supports private, equity, handling. And very. Little innovation has come into this this whole private, equity space in, a very long time it is this very little innovation that has happened and, and, there's. Very little transparency also, so really, people don't know who really owns portions. Of this company and there, are lawsuits, that happen because people. Claim, different, amounts of ownership and so on right so, what, blockchain, can bring in is, if you actually bring, in all the owners of, so. These owners at owners a private equity or typically. High-net-worth. Individuals it, could be, institutional. Investors. Could. Be large banks, that, are investing, in companies right. So. Bringing. All of them onto a blockchain network, can, significantly improve. Insight. Into, transparency. Can provide transparency it. Can also support. Compliance and regulations, that come, that local, countries. Might have on private. Companies it, can help bring in the required, amount of regulatory access, right, today, there are a lot of compliance, issues although, garments. Do have, compliance. Norms. Provided, for private equity there. Are a lot of issues that happen lot of lawsuits, so we can bring in that regulatory, oversight, almost. In a real-time manner and. There are lot of benefits for that and today. IBM is working with northern Northern Trust and, this this. Private equity administration, is actually running introduction, on hyperedge, of fabric today okay. So that brings us to the end of this lecture where.

We've, Looked at just two applications. Right almost at a broad level payments, and securities, trading in, financial services we're going to look at other applications, in financial, services over the next two lectures but. I think there's a lot of fun. Reading that you can look into there's a lot of financial services, concepts, for, instance if you are not aware of the real-time gross settlement system. That's in vogue today RTGS, you should check, out the Wikipedia article does that describes this lot, of countries adopt this today, you. Can look up project Ubben and there. Are a lot of reports that are available so, the code for, project Toobin is also made publicly, available it's in github so. You can go look up the code as well github, link is here so. If you are not aware of commercial, paper then. You can look up the Wikipedia article of, what commercial, paper really is in today's world there. Is a small. Demo on hyperedge of fabric of. Building. A commercial paper application, there's, a YouTube video of that and, again private equity and what it means some of the issues with it again. A Wikipedia, article for, that so, I would encourage you to explore the space if you are really interested, in in the financial services space and how people. Think it can completely it's going to completely transform the financial services industry today, that. Thank you and see you soon.

2019-05-08 01:21

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Fun Reading Links: 1) RTGS : 2) Project UBIN and reports: 3) Project UBin on Github: 4) Commerical Paper (Wikipedia): 5) Trading Commercial Paper on Blockchain (Video): 6) Private Equity (Wikipedia Article):

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