2015 has seen no shortage of major financial institutions jumping onboard the blockchain bandwagon – in the last two months alone, more than 22 banks have announced pilot projects focused on the emerging technology.
One of the earliest and most vocal financial institutions in the fray, however, was US stock exchange Nasdaq, which revealed in May it had been working for a year to harness bitcoin’s distributed ledger for private stock sales.
Whether the bitcoin blockchain will emerge as the one ledger to rule them all, a predecessor to more refined, enterprise-grade technologies or one blockchain among many, remains to be seen, but Nasdaq suggests it is equally interested in any of these possible futures.
In an exclusive interview, Fredrik Voss, vice president and head of blockchain strategy at Nasdaq, spoke to CoinDesk about his organization’s strategy for communicating its thesis on the technology to those just delving into similar research.
Voss told CoinDesk:
“You get confusion around bitcoin and blockchain, there is an increased understanding that there are two innovations, the asset and the technology innovation.”
Appointed in June, Voss previously served as the company’s deputy head of commodities, but admits he was a “newcomer” to the technology before assuming the position.
Voss presented a clear roadmap for Nasdaq’s development, adding candidly that the company is not “married” to the bitcoin blockchain, but is rather “ledger agnostic” in its approach, believing bitcoin remains the best ledger system for its current needs.
Still, it’s the underlying technology that Voss believes holds “great potential” to solve pain points in the operation of financial markets due to attributes such as its auditability and security.
“That is what attracted me and attracted Nasdaq, and the potential of creating efficiencies and releasing capital that is locked into post-trade processes. Those are powerful and attractive attributes,” Voss said, adding:
“Now of course it remains to be proved that those things can be deliver.”
The comments comes as part of a wider interview that finds the firm opening up about its stance on bitcoin, touching on topics such as the role of blockchains in settlement and how its work fits into the broader explorations being conducted by major banks.
Inside the initiative
Voss described Nasdaq’s blockchain operations as informal yet expansive in scope.
For example, he declined to disclose how many full-time team members the company had working on the technology, but suggested the number of those working on such projects “once a week or once a day” is above 25.
Nasdaq’s blockchain group, he said, is divided into technologists; those performing supporting functions such as communication, information security and legal work; and its business unit, which defines the use cases on which it experiments.
“Currently, it is really a combination of informing, inspiring and encouraging the organization and the unit to see where the opportunities are with this technology,” Voss explained. “It’s not that we’ve set aside money and resources and we sit in a room and think big thoughts, we’re leveraging the entire organization and using the organization as it is.”
Certain departments, he hinted, are looking at proofs of concept and prototypes, though he declined to reveal details about unannounced projects.
Question of ownership
Voss also weighed in with his view on the more theoretical arguments ongoing in the space, elaborating on his view of how asset management should ideally function on a blockchain.
For example, in its Nasdaq Private Market, private shares are issued via colored coins, a process by which the metadata of a bitcoin can be augmented to represent a real-world asset. Up for debate is how beneficial this advent is when more advanced blockchains using smart contracts can move data sophisticated enough to serve as the asset itself.
Voss, however, dismissed this concern as academic, arguing that while this outcome may be desirable in the long term, more simplistic uses of blockchain technology still offer advantages over today’s best practices.
“You have electronic representations of paper-based certificates and you have electronic representations of physical assets in other markets. The attractive attributes of a distributed ledger is the settlement immediacy of even those tokens,” he said.
Voss argued that today’s technology lacks the ability to achieve “immediate settlement”.
“Then there’s the distribution and the efficiency you can have when not having to replicate the same transaction over and over and over again, and you can have the 24/7 aspect, you’re operating around the clock which in most markets is difficult to achieve,” he continued.
Looking out, he acknowledged having assets directly embedded into the blockchain would be more beneficial, but suggested Nasdaq still believes the technology is attractive today.
Voss further provided clarity to Nasdaq’s work and how it fits into the large experimentations being conducted by major financial institutions.
Addressing distributed ledger startup R3 CEV and its acquisition of 22 major banking partners, Voss said he was encouraged “more sources and more brains” are entering the space, even if he doesn’t envision major stock exchanges striking a similar alliance.
“We think it will increase the pace of work in the field, but I think it’s too early to talk about bank-chains or exchange-chains, it feels too much like early days,” Voss stated.
Voss suggested he would be happy to share findings with major banks, but suggested its emphasis would be on matters relevant to its business. This included making its clearing and depositories more efficient and improving the technology it licenses to partners.
“We have a market technology business where we provide settlement solutions to others around the world, and for us to add distributed ledger systems to those systems adds value for those clients,” he said.
Private markets work
Voss was less open about the ongoing work being conducted by partner and portfolio startup Chain to develop its new blockchain-based Nasdaq Private Market.
However, he emphasized that the project is on schedule and that it continues to meet internal benchmarks, even as similar products are also set for launch by companies including Digital Asset Holdings and Symbiont, among others.
“What I can say is we make public what we make public,” he said. “We’ve set up a number of milestones internally, we’re hitting those milestones and proof of concepts and putting out releases of user interfaces and testing those.”
Should this positive progress continue, Voss suggested Nasdaq could launch its Private Market product before the year’s end.
Fredrik Voss image via Nasdaq