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The Weekend Read: July 17

1. Blockchain Explainer (for financial markets) by the FT Philip Stafford does an excellent job, both in print and video, in explaining why banks have "a keen interest in applying the blockchain...to financial markets."

He goes on to note:

As with any new technology, experimentation abounds. The term “blockchain” is becoming difficult to define. For instance there is a growing debate about whether a blockchain even needs a digital token like bitcoin. Some start-ups are turning to “permissioned” distributed ledgers, where permission is granted to approved actors to access the network, and quickly record trades and discover asset ownership.

This echoes the debate that Tim Swanson has written about extensively. PaymentSource does a nice overview in their article A Very Public Conflict Over Private Blockchains. I recently ran across a nice chart by Jack Gavigan that attempts to further define the 'taxonomy' of distributed ledgers:

jack gavigan blockchain taxonomy

2. More Blockchain Love

SCB's Group Chief Innovation Officer, Anju Patwardhan, lays out a great argument for how blockchain approaches can be integrated into the financial system, across both banks and regulators, in her post Blockchain – a disruptive force for good?

For banks, the blockchain has the potential to become a technology model for a low-cost and transparent transaction infrastructure. While Bitcoin is unlikely to dislodge paper money, its greatest legacy would be the benefits of the underlying blockchain technology to the security of banks and the integrity of the financial system – which remain closely intertwined.

If this takes off, prices for trading, money transfers, remittances, credit cards and other products could potentially be undercut drastically to the benefit of consumers. This infrastructure could be adopted to make financial transactions more secure and traceable for customers, banks and regulators.

Accenture joins the consultancy deluge into all things blockchain-thought-leader-y with a very well written report entitled Blockchain in the Investment Bank:

accenture

3. FinTech Odds 'n Ends

American Banker highlights how banks have started to warm to opening up internal systems to outsiders via APIs:

"It's like breaking a few windows to let free air and light in," said Andres Wolberg-Stok, global head of emerging platforms and services at Citi. "It ends up benefiting fintech as a space." The new openness is unprecedented, unless you look at other industries. "Google makes their Maps API available. PayPal makes their payment API available. FedEx makes their location and tracking APIs available," pointed out Eric Connors, senior vice president of products at Yodlee, a company that provides account aggregation and API integration services to banks. For those well-known brands, the motive is to move more transactions or users through their systems.

For banks, the main driver is innovation. By sharing APIs, in some cases through hackathons in which outside developers are given software tools for a prescribed amount of time with which to build new apps, new ideas can be generated and tested.

McKinsey goes for the headlines by arguing that the oft-hyped Internet-of-Things opportunity is, in fact, underhyped. And boy, do they hype it:

 

mckinsey

Yet it is interesting to note that McKinsey cuts their hyperbolic forecast by 2/3rds noting "If machines can’t talk to each other, says McKinsey, the Internet of Things might only be a $3.9 trillion opportunity." Offering another potential pot of gold for those exploring machine-to-machine distributed networks...