© 2017 consensys - cfaemirates.com · The Bank of England selects Ripple, a blockchain startup, to participate in its accelerator program to explore the use of blockchain technology

© 2017 consensys.net


Money from the

Paper-Basedworld is...

Money in the

Digital-Firstworld will be...

● Slow, expensive, burdensome

● Difficult to regulate and oversee

● Easy to counterfeit, launder

● Fast, cheap, portable

● Programmable for automated oversight

● Protected from fraud, money laundering, and financial crimes

“Just as the unfettered flow of information revolutionised human interaction with the coming of the Digital Age, so too will the possibility of unconstrained flow of value transform human trade and industry.” - Advent of Crypt Banking


Peer-to-Peer Value TransferIndividuals can transfer value to any individual without an intermediary.

Network-Driven ControlRules of the network are maintained by the collective rather than a central authority.

Economic IncentivesProper economic incentives encourage participants to play by the rules, supply should be relatively scarce, and instantiation of funds must be done in a relatively fair way.

What do you need to create a decentralized digital currency?


Challenges using decentralized cryptocurrencies as a global currency

EthereumLaunched in 2015, Ethereum represents the promise of bringing digitization and decentralization mainstream by creating flexible, scalable, programmable infrastructure

Scaling to global financial transaction volumes

More like asset than currency - users encouraged to hold rather than spend

Difficulty implementing complex monetary policy

Perceived the tool of criminals and hackers

Concerns of security (privacy, data integrity, etc.)

Tools are not user friendly and intolerant of user-error

Losing Control of Supply

One of the most important operation of central banks is controlling the money supply, including monitoring reserves, debt levels, and inflation to prevent financial crises


Cryptographically SecureCutting edge public/private signature technology secures privacy and identity.*

ImmutableBlockchain is a write-once database. Every transaction that occurs leaves a permanent trace.*

DecentralizedNo one participant can tamper the record. Consensus among majority is needed to update the database.*

Smart ContractsBlockchains like Ethereum can store both data and Smart Contract (“Logic”) in the blockchain.*

Benefits of State-Backed Digital Currency

Enhance economic insightFull access to all transactions

Reduce risksReal-time settlement

Facilitate monetary policyReal-time and digital enforcement

Eliminate bank runsImmediate access to capital

*See appendix for use-case specific applications / benefits of blockchain features


Notable Thought Leadership

Monetary Authority of SingaporeMar 9, 2017The Monetary Authority of Singapore completes first phase of testing blockchain and distributed ledger technology for inter-bank payments which is detailed in report titled Project Ubin: SGD on Distributed Ledger.

People’s Bank of ChinaJan 28, 2017With the completion of recent trial runs, the People’s Bank of China (PBOC) is moving closer to being the first central bank in the world to test its own digital currency

Bank of EnglandMar 17, 2017The Bank of England selects Ripple, a blockchain startup, to participate in its accelerator program to explore the use of blockchain technology in Global Real-Time Gross Settlement (RTGS)

The Advent of Crypto BankingNov 2016The Advent of Crypto Banking examines central bank-issued digital currencies that at the time of publishing was being explored by the European Central Bank in partnership with the Bank of Japan.

Farzam Ehsani, Rand Merchant BankPeter Munnings, ConsenSys (formerly RMB)Coenie Beyers, ConsenSys (formerly RMB)

Fintech 2.0Jun 2015The Fintech 2.0 Paper identifies some of the key opportunity areas within the banking sector, and calls for banks and fintechs to work together to deliver these fundamental improvements.

Mariano Belinky, Santander InnoventuresEmmet Rennick, Oliver WymanAndrew Veitch, Anthemis

Russian ‘CryptoRuble’Oct 15, 2017Russian president Vladamir Putin states Russia will issue its own cryptocurrency - the ‘CryptoRuble’.


● Integrate into the legacy banking system allowing banking institutions to either tokenize their own digital currency from fiat reserves or begin to replace their balances with central bank issued digital currency.

● Fully migrate banking liabilities to state-issued digital currency.

● Banks continue to serve as the custodians for non-banking institutions and individuals and issue credit to the market.

● Allow non-banking institutions to hold their own private keys giving them the ability to manage their own digital cash.

● Allow individuals to hold their own private keys giving them the ability to manage their own digital cash and use it for everyday payments.

Phase 0Core System Development

Phase 1Inter-Bank

Payment Network

Phase 2Banking

Institutions

Phase 3Non-Banking Institutions

MigrateIntegrate

Phase 4Individuals

Build

● Develop the system that forms the foundation of a blockchain-based digital currency platform.




Cryptographically SecureCutting edge public/private signature technology secures privacy and identity.

● Money can be held by institutions in managed accounts or by individuals in a digital wallet using the same platform, and money cannot be moved without direct authorization of a user via their private key

● Near-real time settlement of payments

ImmutableBlockchain is a write-once database. Every transaction that occurs leaves a permanent trace.

● Transactions and contracts written into the blockchain are not reversible and thus tamper-proof

● Money can not appear without central bank authority - resistant to fraud and counterfeiting

DecentralizedNo one participant can tamper the record. Consensus among majority is needed to update the database.

● Distributed networks have no center or single point of failure, making them more resilient - services run on centralized databases can be disrupted due to attacks or outages

Smart ContractsBlockchains like Ethereum can store both data and Smart Contract (“Logic”) in the blockchain.

● Money can be programmed - applications include automated AML and taxation, digitally enforced sanctions, and autonomously compliant financial services and products

● Capable of performing coordinated, multi-party agreements (e.g. trade finance, last will and testament)


Enterprise Ethereum Alliance (EEA) is the largest industry consortium

Public-private blockchains compatibility

The dominant platform for the 'token ecosystem’

Censorship-free vendor-neutral computing platform

Rapidly growing community with 30,000+ developers

Formally-specified security and smart contract capabilities

Multi-billion dollars of value protected on the public network

Private permissioning allows for enterprise and government use

Under active development by the Ethereum

Foundation, the platform continues to grow in terms

of Enterprise adoption, scalability and functionality

Supports private permissioning while

maintaining interoperability with the public chain

Adds in the capability to run decentralized smart

contracts, a Turing complete programming language running in the

Ethereum Virtual Machine

Ethereum builds on the blockchain concepts of cryptographic security,

decentralization and immutability

Documents

© 2017 consensys - cfaemirates.com · The Bank of England selects Ripple, a blockchain startup, to participate in its accelerator program to explore the use of blockchain technology