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The Weekend Read: Back to School Edition 2016

Summer's (unofficially) over, Hermine aint here, and it is time to get back to school.

1. Blockchain Hype

The Bloomberg article Maybe Blockchain Really Does Have Magical Powers produced a fair bit of chatter in the office this week. Some couldn't get past the snark, but your author respects good snark when he see it. The article calls into question the hyperbole of the WEF report released this summer and also highlights our recent Corda whitepaper:

What's new is that each transaction comes with attached code (a “smart contract”) containing standardized rules about how to decide whether it is valid. The parties download and independently run the code to verify the transaction. This is cheaper and faster than traditional reconciliation, because it eliminates the need for a bunch of back-office employees at each separate institution to reconcile transactions using their own unique sets of rules and data fields.
[SNIP] The only thing previously stopping the standardization of reconciliation processes was the unwillingness of financial institutions to collaborate. Financial institutions spend $65-80 billion on back office reconciliation every year. The employees working in back offices probably offered lots of excellent reasons why their roles couldn’t simply be standardized away.
[SNIP] Standardization of rules and data fields is a good idea that could save billions of dollars in back-office reconciliation costs. Maybe one of the biggest effects of all the blockchain hype will be getting a bunch of security-conscious egoists to come to an agreement that benefits them all. That would truly be magical.

More in don't believe the hype: Adam Ludwin of Chain tries to slow the roll of "put a blockchain on it" enthusiasts:

It’s strange to hear chief executives pour cold water on technologies that are at the heart of their own companies. Yet that’s what Adam Ludwin, who is the CEO of blockchain company Chain, did when I met with him this month. The hype over blockchain—a new form of record keeping that relies on a shared digital ledger—is causing people to lose sight over what the technology is meant to do, according to Ludwin. “Blockchain is a database for money,” he said. “I don’t understand why people talk about it in terms of health records and home deeds and voting systems.”

Couple these articles with the recent Gartner Hype Cycle warning, and it shows how important delivery becomes as we head toward 2017.

2. Catching Up

A few updates and announcements to share:

Visa eyes new link in blockchain payments

The project is designed to cut costs, speed up settlement time and reduce credit risk in the market for moving money between banks both domestically and across borders. It could represent a challenge to the Swift interbank payment system, the main messaging system used by banks to handle large money transfers. Swift has recognised the potential threat and has itself been examining blockchain’s potential.

Swift warns banks about successful raids by hackers

Swift — the Society for Worldwide Interbank Financial Telecommunication — warned its members that while there had been fewer publicly reported cases of banks being attacked, hackers were still on the hunt for weaknesses in their security systems. “We have seen new cases of input fraud since we last wrote to update you on these issues,” Swift said in its letter. “The attackers have followed a broadly similar modus operandi, but have specifically tailored every attack to each individual target.”

Smart Contracts Firm Taps Wall Street Vet as President, Chairman

Symbiont, a developer of software for self-executing smart contracts, has hired Wall Street veteran Caitlin Long as president and chairman.

IBM Bridges Blockchain, AI With New Business Unit

IBM is reorganizing its internal blockchain team into a business unit that encompasses its artificial intelligence and cloud computing efforts, called 'Industry Platforms.' In addition to the work on blockchain tech, the business unit will lead IBM's efforts to bridge its financial services work with its Watson artificial intelligence initiative.

Key themes from the R3 summit on smart contract templates

A nice summary of our recent summit (rumor has it that there may be a follow on summit in the coming months...)

Eleven Reasons To Be Excited About The Future of Technology

Not exactly an announcement, but this is a really cool summary of all the things to be optimistic about in technology. When you get bored of being excited and feel like trying on some dread and paranoia, check out this review: Homo Deus by Yuval Noah Harari review – how data will destroy human freedom (!)

3. An R3 Welcome

Two big shout outs this week. A warm R3 welcome to China Merchants Bank and to Met Life!