At the end of June, the “Innovationsforum Blockchain” sponsored by the German Federal Ministry of Education and Research presented itself for the first time with an evening event on “Blockchain and Banking”. The evening was moderated by Frank Bolten, CHAINSTEP Managing Partner. In the premises of the lawyer and tax advisory firm CMS Hasche Sigle in Hamburg, nearly 80 interested persons had gathered. The evening was opened by Dr. Jan C. Rode, project manager at the Innovationsforum and CHAINSTEP Marketing Manager, before Bolten took over the moderation.

Moritz Gerdes from Comdirect Bank gave a talk on blockchain-based innovations and future scenarios for the financial sector. Comdirekt itself works on a blockchain use case for peer-to-peer trading of CFDs with risk limitation. Participants can issue financial contracts themselves and act directly without an intermediary. The first test ran on Ethereum, which proved to be not yet perfomant enough for this case, the second series of tests will be handled by the Linux and IBM supported Hyperledger blockchain. “Due to its special characteristics, the blockchain technology is predestined for use in the financial sector. In theory, the improved security architecture could simplify operational processes, but some regulatory hurdles still need to be overcome “, summarized the Innovation Manager.

Dr. Jörn Heckmann, host for the evening and senior associate at CMS, spoke about smart contracts. This does not include contracts in the proper sense, but automatically and previously unstoppable programs, which, however, can lead to legal consequences (eg if the leasing company blocks the ignition in the case of ubpaid leasing leases for the car). Here, the contractors act as both judicial and executive power (in the event of a loss) – something which we deliberately separate in our society and gives a first glimpse of possible regulation within the blockchain world. “However, Smart Contracts are the logical next step in a world where contracts are digitized and automated,” says Heckmann.

Prof. Dr. Philipp Sandner is the head of the Frankfurt School Blockchain Center at the Frankfurt School of Finance & Management. In his talk he reviewed the efficiency of our current payment system in comparison to the increasingly popular blockchain technology. In Initial Coin Offerings (ICO), startups take ever higher and higher sums – in part only for concepts and not even for functioning prototypes. “Nevertheless, banks and other intermediaries have to think about their business model if they want to remain part of the development,” said the blockchain expert.

The event was rounded off by a short panel with moderator Bolten and all three guests, before the buffet and networking were opened after just 2.5 hours. Here you can read the report of the Innovationsforum (including videos of the lectures).

In the past few years, there has been hardly any industry that has undergone so many changes internally as banks and financial service providers. However, surprisingly little has been achieved for consumers – perhaps with the exception of switching accounts or multiple account dashbooard. Blockchain is a possibly disruptive technology with far-reaching implications for the financial sector. The CHAINSTEP industry spotlight shows which areas of the financial sector could benefit particularly from this.

Payment systems

While Bitcoin still dominates the headlines as a means of payment, speculation and investment, Ripple established itself at the end of April this year as an exciting alternative for the international interbanking settlement, at the latest by taking on ten additional banks and financial services providers. The company, with offices in the US, UK, Luxembourg and Australia, reduces the costs of global payments through the use of blockchain technology and works on the vision to put the exchange of values in the Internet of Value (IoV) on the same level as real-time communication (like Twitter)

CHAINSTEP assessment: The hype about Ripple on the markets is growing steadily. The company is increasingly becoming an important service provider for banks. The IoV is, however, still in the far distance and rather for the B2B area interesting.

 

At the beginning of 2017, Deutsche Börse presented its first concept for the risk-free transfer of commercial bank money through a blockchain infrastructure with “CollCo”. P2P payments with the CollCo token are accompanied at the same time by collateral between the respective Eurex Clearing Members. On the one hand, the Frankfurt intends to tap existing and new applications and realize cost savings. InAs early as 2016 the stock exchange had already worked with the Bundesbank on a blockchain based project.

CHAINSTEP assessment: With “CollCo”, Deutsche Börse is actively working on the future and wants to convert data into investment tools. So Exchange 4.0 can become a reality soon.

 

Business models

While some are still optimizing their business model (see above), technology providers such as Abra are already working to offer banking services without acting as a traditional bank (eg with deposit protection and other regulatory requirements). Using a smartphone wallet app, fiatpaper money (dollars, euros) can simply be sent likeas an e-mail and exchanged back into the local currency by Abra-authorized exchange offices / traders via smartphones. In the background, the bitcoin blockchain ensures the processing. Through hedging, the typical volatility of cryptic growth is excluded here. In terms of speed and transaction fees, “stags” like Western Union are quickly falling behind.

CHAINSTEP assessment: Banks have to adapt to new market players from other sectors. If they do not have blockchain skills or can not join a consortium, they run the risk of becoming quickly obsolete.

 

R3 is exactly such a consortium and unified 70 of the world’s largest banks and financial institutions by the end of 2016. Based on the blockchain technology, the company wants to become a kind of Microsoft for the financial world and simplify and accelerate payments between regulated participants. In addition, the development of the blockchain as well as solutions for operational processes are developed in a “laboratory”.

CHAINSTEP assessment: With the demission of important banks at the beginning of the year, R3 was a little bit off the mark. R3 might still believe to have time to develop commercial products. This may soon turn out to be deceptive.

 

Smart Contracts

The nearly 90 companies and start-ups in the fields of technology, consulting and finance, which are united in the Enterprise Ethereum Alliance (EEA), want to take a step further and establish a completely new business logic with the so-called “Smart Contracts”. These self-running and non-stopable programs form the backbone of Ethereum and enable the digitization of many of our daily practices and business processes. The greatest challenge is the interplay of sufficient transparency and the trust necessary to carry out transactions.

CHAINSTEP assessment: The project of the EEA is ambitious and the members already have a long wish list. If Ethereum carries out its planned development steps in the summer / autumn, first services could soon be available.

 

Æternity thinks the smart contracts much further. By taking on oracles (external data or verifications), blockchains can become relevant to many other industries and applications. In the version of Æternity, a decentralized oracle provides the constant inflow of current (real-world) data, which can then be used to interact with smart contracts. Data protection is particularly ensured by the possibility of keeping both the contracts and important business data outside the blockchain.

CHAINSTEP: The combination of the public ethereum blockchain with smart oracles seems to be the best way to get hands-on experience with smart contracts after many whitepapers and Proof of Concepts.

 

Note: On 29th June the “Innovationsforum Blockchain” discusses the relevance of blockchain for banks and the financial sector during a meetup im Hamburg, Germany, from 6 pm onwards. Moderated by Frank Bolten (CHAINSTEP), the speakers will be: Prof. Dr. Philipp Sandner (Frankfurt School of Finance) on payment systems, Moritz Gerdes (comdirect Bank AG) on business model innovations and Dr. Jörn Heckmann (law firm CMS) on smart contracts. RSVP here – and follow for more event details (re-live stream on YT etc.) 

Some days before Christmas “Deutsches Zentrum für Luft- und Raumfahrt (DLR)” invited to hold an expert talk about “use cases for blockchain technology” on behalf of the Bundeswirtschaftsministerium BMWi (Federal Ministry of Economics and Energy). The meeting was well organised by Matthias Kuom (DLR) and had the main purpose to discuss the innovation potential of blockchain technology among a small number of experts from academics and business on the one side and a couple of members from BMWi and DLR on the other side. The accountable department from BMWi uses that kind of event formats during the opinion-building process when the necessary steps shall be defined to foster the development of attractive ICT solutions for the national economy , especially for the German “Mittelstand”.

As a start I was asked to hold a 15 minutes presentation on blockchain (you find the presentation below), after that each out of our expert group of seven had the opportunity to comment on three mayor topics: “state of play”, “disruptive potential” and “the role of the government”. The further participating experts were (in alphabetical order):

Raimund Gross (Innovation Manager Blockchain from the SAP Innovation Center Network)
Prof. Wolfgang Prinz (Vice Chair Fraunhofer Institute for Applied Information Technology FIT)
Philipp Richard, Project Director at the “Deutsche-Energie-Agentur GmbH” (Dena)
Stefan Teis (SVP, Group Product & Business Development, Deutsche Börse AG and Member of the Governing Board of the Hyperledger Projekts)
Stephan Zimprich (Partner at the law firm Fieldfisher and head of the competence group blockchain at the eco association)

In a closing discussion round some additional experts played an active role. With Kirsten Hasberg, energy expert BlockchainHub Berlin, gave very interesting insights into blockchain based projects in the market for renewable energies. Another expert was Dr. Martin Holland, who is a member of the management board of PROSTEP AG and the responsible coordinator of the interesting project SAMPL (Secure Additive Manufacturing Platform), which you can find here.

During my business life I happened to attend a couple of events with the target to convey the standpoints of academics and business to responsible persons from the government. The expert talk “use cases for blockchain technology” for me was an outstanding event. The chosen format (brief introduction presentation as a start, afterwards a round of questions to well chosen experts following a clear framework and finishing with a discussion round) was well fitting the complexity of blockchain. And our “target audience” – the members from BMWi and DLR – were well prepared and put intelligent questions what led to good and intensive discussions.

For sure there will be further events “politics meets blockchain”. The many-layered aspects of the blockchain technology bear enormous potential, where politics can, and probably here and there must, play an important role – either when we look at regulations challenges or when we look at the gonvernment as a user.

 

 

 

Almost six months after my article to give a general introduction to blockchain technologies was published (click here to read the related post) I wrote a brief explanation on the use case section on this website. In the article on intelligente-welt.de you can find some explanation about the structure of the use case section and how how you can filter the for you interesting projects out of the far more than one hundred entries. Here you find the link to the article (German language only).

 

 

During the Fintech Week Hamburg (10th-14th of Oct 2016) Florian Glatz, software developer and lawyer from Berlin, held the interesting presentation “From Fax Machines to Fact Machines” (charts are mainly in German language). In my eyes the most important slides are:

  • the triad of scarce resources, economic incentives and free competition is an important base for the crypto economics
  • design principles: while one goal of legal contracts is to anticipate aberrations by smart contracts only the “happy path” is defined
  • the limits of smart contracts: the parties¬¥ motifs underlying a contract are expressed implicitly as a maximum

In addition please pay attention to the three perspectives on regulation at the end of the presentation.

 

 

3-hours blockchain-workshop a the NEXT16 Conference in cooperation with Astratum. Targets of the workshop:

  • Convey basics of blockchain technology
  • Explain the disruptive force made possible by the ingenious combination of different technologies
  • Present use cases out of different branches

The event (a list of the presenters you find here) was divided into four parts:

  • blockchain basics (Frank)
  • business blockchain (Sven)
  • use cases (Sven, George, David)
  • tech talk (Frank with David and George)

Finally we were able to have individual talks in smaller rounds with the blockchain experts.

Special thanks to George Papageorgiou, who flew in from Athens just to perform on NEXT16 and to David Roon, who took the hardships on himself to travel directly from Ethereum Devcon2 in Shanghai to Hamburg to be on the NEXT16 stage just a couple of hours later.

In the slideshow you find some impressions on the event “blockchain experience” at NEXT16 as well as the slides of my presentation “blockchain basics”. In case you are interested to receive further information about the “blockchain experience” at NEXT16 please contact us.

You can find further presentations and videos from NEXT16 here.

 

 

Invitation by the „Bundesverband Informationswirtschaft, Telekommunikation und neue Medien e.V. Bitkom“ to the „Bitkom Fintech Day“ as a blockchain expert. In October 2016 a discussion is held whether or not a separate blockchain workgroup shall be set up.

Bildschirmfoto 2016-09-06 um 13.29.08.png

Bitkom-Arbeitsgruppe “Banking, Financials & FinTechs”

 

 


Three months after the start of the MIT Fintech Certificate Course “Future Commerce” the winning “Capstone Projects” are announced. The project “Community Token”, developed in cooperation with Christoph Martin, was awarded by the tutor team as one of the top eight projects out of more than 200 projects.

Read more

The following article (in german language) I wrote with he target to provide the interested audience:

‚Üí An overview, how the technology works
‚Üí Present several use cases
‚Üí Explain some of the political framwork

Article on www.intelligente-welt.de “Blockchain – programmiertes Vertrauen”