Some of the world’s leading corporations are using the technology that underpins the cryptocurrency bitcoin to try and make their own operations quicker, cheaper and more secure.
In September, a syndicate comprising Capital One, Citi Ventures, Fiserv, Orange, Nasdaq and Visa said they were together investing $30m into Chain, a US-based provider of blockchain technology. A blockchain is a potentially secure online database that can be used to record anything from financial transactions to mobile-phone credit and property deeds.
Entries into the database are timestamped and shared across thousands of computers on the internet, making it both transparent and extremely tamper-resistant.
While the blockchain was originally created to support bitcoin, major banks and payment processors have been quick to see the potential applications and benefits this technology could have for their own operations. Adam Ludwin, Chain’s CEO, said: “A blockchain is more than a financial technology – it’s a strategy. Applied intelligently, blockchain networks fundamentally improve how assets move between parties.”
Transactions are recorded automatically on the blockchain’s shared ledger, providing transparency to the issuers and owners of assets as well as to regulators, for example. Parties to any blockchain trades use cryptographic signatures to confirm transactions, which, Chain said, makes this form of asset transfer “safer than any other alternative available today”.
Ludwin added “We are thrilled to be partnering with the organisations we believe are best positioned to capitalise on the inevitable changes in market structure that are on the horizon.”
Nathan Krishnamurthy, from Capital One Growth Ventures, said: “Blockchain technology has many compelling benefits — including cost, resiliency, speed and security — and application of the technology could span far beyond virtual currencies to such areas as payments and lending, smart contracts, records management, and investment platforms.
“We are excited to be part of this technological transformation with Chain, and have been impressed with their collaborative and thoughtful approach to innovation.”
Chain was set up in 2014 and works with partner companies to design and implement blockchain networks for specific markets and assets. In June 2015, Chain entered into agreement with Nasdaq to provide its blockchain technology to expedite the transfer of securities on the exchange, and the first blockchain-backed trade using Nasdaq’s Linq system was carried out on 30 December 2015.
Ludwin said financial services companies had “a lot to gain” from exploiting blockchain technology. “By transferring assets digitally over internet-based networks, they can avoid using costly clearing houses or doing complex integrations across entities.
“They’ll also be able to build more innovative products, and that’s good for everyone else. When trusted institutions issue digital assets on the open internet, financial services will be less expensive, more secure, work better together, and be accessible to more people around the world.”
Chain’s investors have also agreed to set up a blockchain working group in collaboration with leading technologists, academics and researchers. The group is due to convene twice a year with the aim of identifying points of interoperability between blockchain-backed financial networks.
“Blockchain technology represents a fundamental, generational shift for financial services, and Chain’s platform is enabling and accelerating this transformation,” according to Ramneek Gupta, managing director and co-head of global venture investing at Citi Ventures.
“We hope to leverage Chain’s platform to rapidly test and develop applications as part of Citi’s multi-faceted blockchain strategy which has the potential to greatly enhance our customers’ experience well beyond just currencies and payments.”
Brad Peterson, chief information officer at Nasdaq, said his company’s collaboration with chain would increase efficiency in the capital markets.
“We see their platform helping us accelerate our time-to-market across our various blockchain initiatives.”