Blockchain simplified –Finance 2.0 / Crypto ‘16...Bitcoin in a nutshell Page Swiss Exchange A...
Transcript of Blockchain simplified –Finance 2.0 / Crypto ‘16...Bitcoin in a nutshell Page Swiss Exchange A...
Blockchain simplified – Finance 2.0 / Crypto ‘16
Rolf Broekhuizen, Crispin de Courcey-Bayley - SIX Swiss Exchange
Zürich | 13 Sep 2016
Introduction
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Introduction
Overview
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Background
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We need to have a common understanding of what it is…
Blockchain: Where to begin ?
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Blockchain: overcoming the misunderstandings
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Blockchain is a ledger – but this is nothing new.
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Bitcoin is money – coins have been around for a while.
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Bitcoin allows addressed payments over large distances.
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History of Money – Paper money back by the state.
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Cash transactions: a rare form of transferring money
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Background of Bitcoin
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Bitcoin
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• A ledger spread across many computers
on an open network;
• Highly scalable and resilient;
• It uses cryptography to encode payments;
• It validates transactions by consensus;
• It requires no intermediaries;
• It prevents double spending by time-stamping and
broadcasting all payments across the entire network;
• A proof-of-work concept makes transactions very hard to undo
Bitcoin in a nutshell
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A video about Bitcoin
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Random text generator
Hash generator link
Creating a hash
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Bitcoin solves the double-spending conundrum
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Create a block and put it in a chain
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Hashing the block
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Permissioned Distributed Ledger
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International Law
National Law Ordinances
Governance
Legal obligations or technical code ?
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Code
Legal obligations or technical code ?
Code
Code
Code
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Blockchain or DLT or just a shared ledger ?
Who: Everyone SIX members SIX members SIX
How: Open Authentication Authentication N/A
What: Everything Everything Relevant info N/A
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Shared ledger architecture
Value Chain
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SIX as a leading fully vertically integrated exchange
providing the Swiss Value Chain
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Source: SNB
Trading
Clearing
Settlement
Seller
delivers 1000
receives CHF 42,600
Buyer
receives 1000
pays CHF 42,600
Buyer Collateral SellerCollateral
Buyer SellerOrder
Buy 1000
Order
Sell 1000
CHF 42.60 per share
matched
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Let’s take a second look at the value chain
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Trading
Clearing
Settlement
Seller
delivers 1000
receives CHF 42,600
Buyer
receives 1000
pays CHF 42,600
Buyer Collateral SellerCollateral
Buyer SellerOrder
Buy 1000
Order
Sell 1000
Source: SNB
CHF 42.60 per share
matched
Tim
ing
is
T p
lus 2
da
ys
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Let’s look at the full picture
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Ledgers ( ) are in every node in this landscape.
Which ones shall we replace with distributed ledgers?
Clients Banks
Stock Exchanges
CSDs
LSE
DB
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SIX and its members
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This is what is currently being discussed in SIX – small steps
Clients Banks
Stock Exchanges
CSDs
LSE
DB
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Summary
Requirements
• A virtual currency that is not bitcoin
• Ability to ensure that members’ portfolios are not visible to their competitors
• A SIX-validated ledger system exclusively for regulated financial institutions
Benefits
• Much faster settlement, freeing up capital for our clients
• Greater efficiency for our clients through further automation of the back office
Challenges
• Migration of the securities
• No short selling possible, you can only enter a sell order if you have the security in your portfolio
• No end of day netting for market makers
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Summary
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Summary
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The current implementation of the SIX value chain for post-trade
settlement derives from paper-based processes.
DLT offers opportunities not just to ‘tweak’ existing processes, but
to re-invent certain SIX services.
Succeeding requires an extensive collaborative harmonisation of
business processes between existing parties.
Thus we believe that this change is likely to be gradual and
accretive and not revolutionary.
Conclusions
Thank you for your attention
Rolf Broekhuizen, Crispin de Courcey-Bayley
SIX Swiss Exchange