Blockchain: Believe the Hype?
Three leaders who have successfully implemented blockchain technology into their companies discuss its strengths, limitations and growth potential.
- Matthieu Duncan, Chief Executive Officer, Ostrum Asset Management
- Sally Eaves, Member, Forbes Technology Council
- Olivier Portenseigne, Managing Director, Fundsquare
- Moderator: Liam Kennedy, Editorial Director, Investment & Pensions Europe
“The World Economic Forum believes that 10% of the world’s GDP will be stored on or otherwise accounted for by blockchain by 2027,” said Liam Kennedy.1 “Blockchain can create new architectures and trust between parties in various economic value chains. It can also disintermediate the sweep of intermediaries in the economy, including in financial services.”
What is a blockchain?
Matthieu Duncan, Chief Executive Officer for Ostrum Asset Management, described a blockchain as a database (public or private), shared by different users, using pre-existing technologies (encryption, peer-to-peer exchanges), that provides users with security, data integrity, records of all transactions, and real-time updating, and where any update of the data is distributed instantly without the intervention of a central authority.
To help explain blockchain, Sally Eaves of the Forbes Technology Council used a playground as an example. “You are back at school playing a new game, and there is no referee or umpire,” she said. “If somebody scores, it would be very difficult for someone to say that goal hasn’t taken place. With a blockchain, we have an immutable ledger of transactions. It’s synchronous – you can’t go back and change it retrospectively. If there is going to be a change, everyone has to agree on it.” A blockchain is a team game, built on consensus and embedded trust.
Blockchains will transform asset management
“We think the impact of blockchain on the asset management industry will be very significant,” said Duncan. “The innovation of blockchain is how it’s been put together – it’s a shared database, but without a central authority. There are many databases in the world, and many parties that deal with each other, but they have a central authority, a trusted third party. A blockchain is a great massive disintermediation mechanism of trusted third parties, and the financial services sector is chock-block full of trusted third parties.”
Blockchains result in greater speed, lower costs and greater transparency, and all these are massive benefits for participants in financial services, Duncan said. It is important to get this technology out into the world as quickly as possible: “There are only positives for asset managers from this – there is no downside.”
Kennedy agrees, adding, “Blockchains will enable individuals or institutions to establish trust with third parties in a more secure way, and to track the assets that are being sold and bought and traded.”
Funds DLT, the first blockchain solution for asset managers, is expected to go live in the first quarter of 2019, said Olivier Portenseigne of Fundsquare, which helped develop the solution. Because fund distribution normally involves many levels of intermediaries, it is a good use for blockchains. Offering a simple user interface, Funds DLT is based on a private ledger to guarantee both confidentiality of data and speed – up to 25 million transactions a day.
“An asset manager today is completely blind as to who is buying the shares,” Portenseigne said. “We create products, and cross our fingers that they will be bought.” Funds DLT will help transform the industry by providing a greater level of transparency, allowing asset managers to understand customers’ wants and behavior, and create much more targeted services and products.
For additional insights and discussions, we invite you to watch full session replays from the Natixis Investment Managers Summit.
Bitcoin is a type of decentralized cryptocurrency that is not issued or backed by any banks or governments.
Blockchain is a distributed, decentralized, public ledger technology.
Cryptocurrency is a digital or virtual currency that uses cryptography to secure a variety of transactions.
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually or quarterly.
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