Beyond Crypto Currencies, Blockchain Is Poised To Improve Efficiency in the Global Financial Markets in 2020
Over the past several years, a lot has been written about blockchain’s potential to solve a myriad of challenges, from simplifying money transfers, to securing digital voting, to dramatically easing supply chain management, to locking in land title transfers.
One of the most compelling use cases for this technology in 2020 is how it will change capital markets. We caught up with David Walsh, an Internet entrepreneur whose company IXnet build the world’s first financial extranet in the late 1990’s, connecting thousands of banks, market data providers, exchanges, alternative trading systems and more, and who today is disrupting again in the blockchain, distributed ledger and digital (or crypto) currency markets.
“Twenty years ago, we helped the S.W.I.F.T. organization move from their X.25 global network to IP networking, which was represented a significant upgrade for them,” Walsh said, “And in 2019, most payments were still facilitated by the S.W.I.F.T. Now, new fintech firms are offering alternatives and enhancements to that system, combining traditional payment rails with with web dashboards, mobile apps, business software systems and new technology including blockchain to make payments easier and faster, saving time and money while increasing security.”
Walsh, who is also an investor, with thirteen years of experience in Private Equity while at JPMorgan Chase’s One Equity Partners, has placed a bet on the development of blockchain infrastructure that will further speed up and strengthen blockchain transactions, saying “There’s no turning back now; even the most traditional institutions, including the New York Stock Exchange, are actively promoting blockchain through their Bakkt project, and that’s only the tip of the iceberg. Blockchain, with the right underlying networks, servers, cloud and local applications has the potential to speed up trading, eliminate middlemen, and provide more democratic market access in the U.S. and globally.”
While 2019 was transformational for cryptocurrency, blockchain and distribute ledger technologies, Walsh believes 2020 will be a turning point. “The markets needed time to recover from the collapse of Bitcoin and other non-fiat currencies,” Walsh said, “but despite what some might call a PR disaster, Bitcoin turned out to be one of the best-performing asset classes which drew attention and respect. With so many layers and dynamics associated with relatively new digital currencies, we cannot predict for sure that Bitcoin will rise again, but to some extent that doesn’t matter. The ‘concept’ has been proven.”
Walsh believes the biggest value may come from the less well-known use cases for Distributed Ledger Technologies (DLT) across business systems where data sharing has become pervasive, and the need for an immutable ledger is critical. “For data integrity, when data is shared, DLT creates trust and does so in a more straightforward and far less expensive way. Payments, trading, and more will benefit from blockchain-based systems, but to get there we need to ensure the network infrastructure is up to the task, and with the advent of sub-millisecond networking, edge data centers, and faster servers designed with silicon that supports quantum computing, we will address one of the greatest gaps which has been the ability to execute a financial transaction in real time,” Walsh explained.
Walsh believes traditional institutions will pay closer attention to the challengers in this new year and new decade. “The successes and failures of Bitcoin and other digital currencies have been very closely watched over the last few years,” Walsh said. “Some of the smartest people I know have been studying the dynamics and establishing and putting into motion their plans to participate and disrupt themselves as they had to twenty years ago when electronic trading completely upended traditional exchanges,” Walsh said. “This time, networks will be even more important than ever as will security built into those networks, rather than bolted on as has been the case in the past. “We cannot ignore the reach, the resiliency and the economics of the Internet,” Walsh said, “and we’re seeing tremendous progress in IP networking overlay and other technologies that secure sessions and transactions from the inside out.”
When we asked Walsh about big names in the tech industry like Amazon coming into the blockchain and DLT market, he said, “No industry, no institution and no innovator will be immune and needs to figure out how they will benefit from this new way to manage data. Regulators certainly are on top of this, and we’re seeing a positive level of attention being paid to ensure security and protection from too much volatility, while still allowing the open markets to work.”
Walsh agrees that quantum computing will also accelerate dramatically in 2020, especially if the infrastructure is in place to handle exponential volume surges.
Last year, Google published the results of a test where its 54-qubit processor performed a computation in 200 seconds that it says would have previously taken 10,000 years.
Walsh highlighted opportunities in the insurance industry as a sub-sector of financial services. “Smart contracts are a no-brainer,” Walsh said. “Blockchain and DLT matured greatly in 2019, despite the cryptocurrency aftershocks. This year look for bigger and faster blockchain-ready networks designed to support decentralized applications, including very important, fast growing IoT and Industrial IoT applications.”
When asked about announcements from the largest chains (Ethereum with ETH2.0 and NEM with Catapult, both coming online early this year), Walsh said “When pioneers stick with it, invest, learn, improve and never give up, they are rewarded. With large enterprises, institutions and government agencies, including regulators, assigning top leaders to design and roll out blockchain and DLT programs, the early movers are positioned to attract even more resources to develop more capabilities and support more applications. We’re gone through the proof-of-concept era, and we’re well into a world where scalable frameworks are ready to go, where existing systems can be enhanced with distributed approaches and brought into the mainstream. Key will be to ensure we are ready with the physical and digital infrastructure that will support scaling things up, securely and reliably, in the exabyte then zettabyte eras. Look for more demand than we could have imagined for capacity and speed, and look for massive deployments of fiber optic infrastructure, supporting applications, including those which will have to function on both fixed and mobile networks.”
Originally published on The Blockchain Domain