One Chain to Rule Them All: Why Everyone Wants to Be The Lord of The Blockchain

The Depository Trust & Clearing Corporation (DTCC), a US-based post-trade financial services company, announced its plan to launch a proof of concept-based Blockchain platform by 2018.

Over the past 12 months, DTCC has been collaborating with various Blockchain infrastructure providers and developers to build a Blockchain-enabled Trade Information Warehouse. According to sources, a group of Blockchain startups led by IBM, Axoni and R3 are currently working with DTCC in developing a base platform which is set underpin DTCC’s global derivatives system in the future.

On Jan. 9, DTCC president and chief executive officer Michael Bodson stated that the company is dedicated and focused on showcasing the potential of Blockchain technology to the financial industry by drastically lowering the operating costs of DTCC.

Bodson stated:

"The test showed that distributed ledger technology could handle all the various types of events processing needs for credit default swaps and it showed that it could be done at a lower cost point than what can be done with our existing infrastructure. The project will prove to the industry that it (Blockchain) is a powerful technology that can deliver benefits."

Maintaining momentum, first Blockchain platform by 2018

Besides the Blockchain Trade Information Warehouse project being actively developed by Axoni, IBM and R3, DTCC is also pursuing a separate project with former JPMorgan executive Blythe Master’s Blockchain company Digital Asset.

The development teams of Digital Asset and DTCC successfully completed a testing phase earlier in January. Maintaining the current momentum of the joint Blockchain project, DTCC executive director of industry relations Tony Freeman noted that DTCC’s first Blockchain solution will be launched by next year.

One major difference between DTCC’s Blockchain-enabled Trade Information Warehouse and the company’s joint Blockchain project with Digital Asset is that the latter will be used for processing repurchase agreement (repo) transactions and providing a platform for the US Treasury.

While a Trade Information Warehouse settles a significantly high volume of transactions and trades on a daily basis, the repo market has a substantially lower volume of transactions and settlements in comparison to the derivatives market.

Considering the small volume and high value of the repo market, Freeman explained that Blockchain technology will be more applicable as a semi-manual automation technology. Since Blockchain technology is not designed to handle massive amounts of transactions or data points in real time, Freeman said that the Blockchain will be able to optimize the repo market.

Freeman stated:

"If there were a lot of transactions it would have been automated a long time ago. It's a small volume, high-value market. You can deal with it on a semi-manual basis. We're at a very early stage and adoption is absolutely key. Lots of people want to be the 'lord of the Blockchain.’ There's a phrase which a lot of Blockchain advocates use: 'one chain to rule them all.' Everybody wants to be the controller of the Blockchain, so interoperability is absolutely key."