so we were all talking about before that
we got on stage about this panel and
potentially something very important
very serious smart contracts banking and
we we agreed that when you talk about
something this serious you're supposed
to look at the audience like they're
naked
so you're not nervous and we gotta say
you've got a great-looking group here so
as any banking panel would start we have
to start with a disclaimer and no one
here is talking on behalf of the banks
and we're all talking from personal
opinion and we're just gonna go through
basically what we have been doing in our
past what we see as present
opportunities and what can happen in the
future so could I start with you Lee can
you hear on this mic okay so my name is
Lee brain I work at Barclays in the
investment bank part of the CTO division
my background is primarily computer
science many years ago so degree and PhD
in that my specialism was in functional
object-oriented programming
combining the two in the past 25 years
since then been working in banking
primarily Investment Banking were also
wealth management and corporate banking
and years ago some retail banking
there's been a mix of technology
advanced technologies and also a lot of
banking now within the last year or so
at Barclays investment bank we've been
involved or I've been involved looking
at architecture and innovation so from
an architecture perspective it's looking
at technology standards
and there about a few hundred of those
in the bank and then if we look at
innovation I've been focusing in the
last year at blockchain and specifically
within about looking at shared Ledger's
meaning interbank Ledger's and also
executable business logic so smart
agreements smart contracts that's my
introduction
yes I started life as a mechanical
engineer quick quickly switched into
into software I used to work with
embedded systems technology and and now
and joint joined UVs been with us for 13
years always been a technologist my work
in our CTO function so I'm a Technical
Architect the last few years I've been
working in R&D team so I've I've touched
on many many technologies and and now my
focus for the last year has been been
being blockchain and that's my specific
role at the moment is to investigation
blue.i I'm my name is James Casas and
prior to joining consensus as CFO and
head of capital markets I managed a
derivative arbitrage book and structured
products for a bank that used to be
known as Lehman Brothers and
subsequently I found myself looking for
a new job and ended up running a hedge
fund of life settlements and longevity
risk and things that we're doing at
consensus along with our partners at
Microsoft we have created a simple use
case of Total Return swap and basically
what it is to do is is really more to
have the bank's really good to see
lots of the different use cases of what
what can be done with the blockchain so
the the swamp basically takes you
through all the different areas that
we've been discussing at the conference
if you just imagine prior to entering
into a trade you're gonna want to know
who is you know you have to go through a
know your customer and so we use an
identity type of system and from there
we again needing to know what kind of
collateral is going to be needed to be
held so our reputation systems things
that are not to be in place today or
even the next year or two but really to
give an idea of what what is the future
to look like so on entering a
transaction where we can highlight
obviously eighty plus zero we're using
smart contracts as well as I believe
balanced threes been mentioned several
times with their triple entry accounting
the transaction becomes you do the trade
plus your confirmation so it goes out to
all of the you know both counterparties
as well as moralized on the blockchain
and then and then what we do is is
basically allow for market fluctuation
having price changes and automatic
collateral readjustments without having
the back office be involved and even
employing again the reputation system to
for a kind of party to have a basically
a default risk or a reduction in in
their reputation and then again just
summing up the the transaction again
through the triple entry and all of this
really just shows kind of different
spots where the banks can really look to
be able to experiment and figure out
what other use cases are out there from
using blockchain technology am I on can
you hear me great so I'm I'm Rex I guess
before I introduce myself I'm gonna
steal this line from from Lee because he
actually said it
just before we became we came on here so
I was here on the first day and I've got
to say it's amazing to see how much
enthusiasm you guys still have towards
the end of the fifth day which i think
is a kind of a tribute to how powerful
the conference is so kind of well done
you guys so to me my background is
computer science I guess I should say
what I do at stock gen so I guess you
could think of me as like the the senior
architect in London I work in the
investment bank I head up the UK
architecture for the investment banking
bit so that's not the retail part of
Societe Generale which is in France so
computer science is my degree I spent
about the first 10 years of my career
building derivatives risk management
systems and the second half of my career
has been in software and a bit of
hardware architecture as well so my day
job I spend an awful lot of time with
fintechs so being based in London and
London being one of the major hubs for
FinTech activity we kind of take
advantage of me being located here so
that means that there's a strong streak
to innovation and collaboration for my
job and as part of that I spend a lot of
time thinking and working with other
folks on bit tech so things like
blockchain so that's my background you
know my name is Andrew Keyes I'm a
recovering banker I used to work at UBS
and build lots of products and
distributed them specifically for
insurance in longevity capital markets
and my view on the banking sector with
respect to smart contracts is somewhat
our thuggin all to what we've been
seeing in the consortium settings where
I believe that there's a standardization
request and I've thought that what we
really need to do is give the bank's
access to tools so they can play with
the technology and rather than define
standards give them the ability to
understand what this technology is which
is somewhat pursuant to what we're doing
now with Microsoft where we give this
testbed for the banks to play so with
that said where do you think the future
could hold indeed so you're mentioning
one particular Avenue of experimentation
and indeed so if we were looking at the
multiple avenues so we see actually the
two cross-pollinating effectively you
have experimentation where you have
aetherium and other technologies that we
can play with we can experiment we can
explore the functional the
non-functional behaviors but in parallel
with that we also need to do a
structured design method so architecture
design engineer that so this is a common
theme that we've been hearing over the
last maybe six months or so so we need
to interplay the two of these and learn
from each other and I think one of the
things we found in the last few months
is the speed at which certain
technologies have matured so if we look
to say six nine months ago when we were
looking at some of the experimental
technologies and they kind of fail at
the first hurdle and we if we're
assessing scalability performance data
privacy etc and it's encouraging to see
as the months go by and this is
incredibly fast that startups are
already pivoting making adjustments to
their propositions and the technologies
in order to come back with things that
are more suitable for banking and I'll
give one example for this so data
privacy is key if we look about a year
ago maybe a year and a half ago everyone
was saying well it all needs to be
completely transparent in public then
there's a bit of a shift and saying well
actually we can do some encryption as
well and model items within that okay
take you the next step further maybe
actually you don't want just one chain
maybe need multiple chains and then the
different chain so you can partition
data so you're actually then starting to
get inside the heads of the architects
within investment banks when they say is
the first step will it allow us to do
ABCD so in the past it used to be failed
failed failed and it was like failed
parts of failed paths and it's nearly
getting there now so it's quite
inspiring as we were saying to actually
see that progressing we definitely see
the value in experimentation
you know we demoed the small pond
experiment you know where we try to
model security just you know that that's
that's probably very useful and as an
educational tool and also to stimulate
conversation inside the bank we find you
know Express to a line you know we found
that experimentation allows us to
discover you know areas where we need to
focus and you know and that's that's
when we will issue the challenges out to
the community to to help you know fight
find those solutions
you know enable scale enable
transparency and privacy the right
balance of those things they will need
need to be ultimately a need for
standards but we want those to be open
we want those to you know open access
and and and and you know flatten flatten
the the current structures we have today
so you know I think both we need both
sides of the story
I agree where we from our different
enterprise banking clients it seems like
it goes the same way where we have the
bank is requesting we want some kind of
use case that we want to work with and
it may not even be a case that they're
going to then implement through it but
it it seems like it's giving them much
more of an education of how to utilize
this type of technology so and yeah I
think kind of just a natural flow will
be a use case with the internal in the
bank as well as the you know then
growing that from that type of private
blockchain to more of a concerted
consortium blockchain and then grabbing
you know partners so that they can match
up consortio are a good way to do that
validation as well and you know you see
it's not it's not something we can we
can you know for want of a better term
win on our own you know we need we need
to we need participation that that
involves us as banks but also also the
community at large the fintechs startups
like I said a lot of the thinking in the
last couple of months for for suction as
being around you know what value
internally could we generate by making
use of blockchain and and so that's kind
of figuring out okay so what's the state
of the art and as these guys have
already been saying that that frontier
of knowledge she's moving on so so fast
and that was kind of evident from from a
lot of what's been talked about its kind
of conference so just understanding
where are we now where are we going to
be projecting ourselves and then kind of
playing a mating game which is what are
the internal use cases that we've got
where do we see that we've gotten
efficiencies that we can manage to
eradicate how can we create value
internally and to our clients from the
technology and it's just kind of been
trying to figure that out
I think the the dlg consortium which
kind of happened you know what three
four five months ago now was kind of
really a recognition that most
organizations figured out that an
obvious thing that we an obvious
ambition that we have is simplification
and acceleration of the back office is
that we've got so we've got similar set
of financial products we've got a
similar set of processing challenges and
cost overhead associated with that
and that the promise is to be able to
make use of blockchain technology for
the benefit of you know ourselves our
clients and also for the public in the
form of great transparency greater
predictability greater proof via
construction of correct running now this
is the ambition that we have and and the
consortium moment was kind of saying
well actually if we're going to achieve
that no one can do it on their own
because you kind of know that there's no
point having a chain if no one's on your
chain okay you've got to be able to
figure out how to move a significant
proportion of the industry forward for
enough products to be able to get like
an economy of scale effect so in the
last couple of months it's really been
realizing actually let's come together
and
figure out how we can manage to have a
significant number of the financial
participants take a step together and
that kind of means figuring out a what
can we do with the technology now B
where is there whitespace do we see that
there are smart folk out there who are
looking to occupy that to figure out how
to be able to build techniques around
scalability or privacy as Li was talking
about or alternatively
should we as the financial services
offer out a rallying cry to to the smart
folk to kind of say hey we need a
solution here it's going to be of
benefit broadly if we can figure out how
to do this and start maybe putting a
spotlight on some of the areas where we
think if we could answer these problems
before maybe these problems it would
unlock a pathway for us to be able to
deploy the technology quicker and faster
and do you have any concepts that are
relatively low hanging fruit I I see
lots of use cases and and I'm interested
in and it's not really a timeline but
more of what are the bottlenecks from
when we have proof of concepts into real
life using the blockchain
most banks have listed their use cases
for blockchain
they've taken a view of business
priorities against them together with
the technical debt within the bank
meaning how much effort would it take to
get off current systems and migrate to
this new system there's also the
business benefit each Bank has its own
products where it has a strategic focus
looks to increase revenue etc but one of
the things that applies across all the
banks is this idea of the cost reduction
so all investment banks are under
pressure to reduce costs if you're
looking from an ops and tech perspective
there are clear targets against the bank
banks that are expressed publicly and we
view innovation could be applied to
reduce cost that idea helps you then
focus your priority list for what are
your use cases so put in the middle
layer the reducing cost above that would
be regulatory so imagine if there's a
regulatory use case something that's
coming up in the next few years a new
requirement and a solution to that could
involve a shared ledger to help you get
there then you'll be able to get
additional business sponsorship there
would kind of be a win-win for everybody
also potentially an equivalent of
sponsorship from the regulator to
encourage that so I put mandatory
regulatory at the top cost saving in the
middle and then business growth below
that from an investment bank perspective
also need to bear in mind you're saying
in terms of roadmaps so there are large
incumbents that perform excellent roles
at the moment stable reliable so if you
think of the major incumbents whether
you're looking across effect settlement
security settlement the list goes on and
on they have a valuable role and over
the longer term there may be
opportunities to optimize that
processing but what I just wanted to
highlight and this is really throwing
out to the community to come back with a
solution a lot of the conscious smart
contracts you see that are posed on the
board are designed to be solved on
something like aetherium
bear in mind when you move to models
where you've got for example security of
settlements you've got FX settlement
you've got netting processes there are
things that are a lot harder than very
small smart contracts things are pulled
together into a netting pool quite often
the netting isn't just adding up your
credits and debits as a sum much more
complicated you need to try lots of
different combinations to get a high
settlement efficiency so how do you do
that currently what you do is you stop
time you take a snapshot and then you
perform an optimization and at the end
you release that back and inform all the
banks what has changed quite a few
incumbents ask you to transfer more
money than you think you need to perform
your settlement as a wire and then at
the end of that they transfer the
leftover back to you those sorts of
challenges need to be incorporated into
smart contracts in some way and that's
very hard I think it requires not just
banking FinTech I think it requires
academia as well so one of the things
we're looking to do next year is the
banks together with academia for example
the Alan Turing Institute in the UK is
shaped some of these really tough
challenges we're not looking to solve
the technology for it we can pose the
problem and then expose it and look for
academics to work together with FinTech
and I think at that point when we've got
securities settlement with netting then
we know it's come of age so I put that
later down the road map has been saying
yes we want to improve our operational
efficiency and reduce our costs and and
these kind of technologies you know they
are there is great potential there to do
that you know if we can can
have you no single authoritative record
then good thing for the organization's
you know if we can if we can distribute
trust again I think that's a great
concept I mean for us one of the key key
challenges that you know is is the
identity you know know your customer and
and those are the key challenges that we
have to meet and and we all we all do
the same process so so to me that
represents a great opportunity so so you
know and I think you know there's a lot
of great minds in this room and in the
community at the margin and I think it's
a problem that can be solved you know
we've been very public about the kinds
of areas that we're looking at you know
settlement is a is a great is a great
use case and again you know an area
where we can we can achieve khan amis
scale and you know our focus is always
though is obviously on the client so so
everything that we you know we want to
do as organizations is around our
clients so the things that are
beneficial to them are great so so the
ease of access of this technology is
actually curious on the the cost of the
settlement when we look at the different
banks we've looked with you know it's
been more emerging markets developing
areas have seen ways where they could
implement this technology easier just
because here in the you know UK in the
US and things like they were there's
very strong systems in place they main
may not be as efficient so it seems like
it's going to take a longer time for
that type of cost reduction whereas I
think you know a kyc type of idea where
that can start to be in filled
I don't know spread throughout the
and bringing on customers might be an
easier where I'm just curious on how you
address the settlement side of things
because it would be such a big change so
I was picking the hardest case security
supplement if you're gonna pick an easy
one okay for something that's asset
registry-based so for example if you're
looking at a particular physical
commodity that's allocated that may be
easier if we're gonna if we're gonna
issue other kinds of assets on onto a
chain then then we really need to be
able to settle on the same same fabric
if we have to settle and I separate
fabrics and then that creates extra
complexity that we don't know don't
necessarily need so so I think you can
draw some I think you know the
importance of being able to do DVP on
chain rather than a deliverer immobilize
an asset you know on a chain and then
and then have to do a payment of
changing it in a traditional system
so I knew that kyc was going to come up
before they kind of got to me so so just
to kind of jive on um what Lee said so
probably one of the first kind of like
you know base camp for us in in a
broader adoption of the technology is
going to be trying to figure out how to
do some kind of shared know your
customer kind of control process so you
know we are obligated by regulations to
go through control processes to figure
out that we are selling our financial
products to the right kind of folk every
single market player has to follow those
kind of controls and it is a you know
woeful woeful situation that we can't
manage to figure out how to do something
together but the problem is we don't
know how to be able to have you know to
associate a thing to a digital identity
to be able to show you know to be able
to be sure of the entity that we're
talking about and so whilst this isn't a
use case for us to think about in terms
of well this is one of our financial
products but you want to get the banks
on board figure out how to help us with
kyc and anti-money laundering controls
because everyone has to do it it's a
burden for everybody it just increases
the cost base that we have and we've got
to figure these things out before we can
manage to to do things at scale so as
lee was saying it's a challenge help us
figure out how to how to do that kind of
stuff without lock chain technology I
was just curious to know what your
thoughts of the future customer of a
bank because because I think that
there's a generational gap between the
10 year olds the 20 year olds versus the
50 year olds and 60 year olds and how
will that affect strategic initiatives
well I think ideally you've been talking
to retail banking not Investment Banking
on that point however if we were to look
at for example within Investment Banking
by customers so if we take technology as
a part of the bank and the business is
another part so there's a customer
relationship there so technology is
delivering value to the business what
type of technology how does that change
over time so we already have a position
where new graduates join they have
certain expectations around the
development processes and this isn't
just the work environment it's how long
does it take to get something live
what's the nature of the work
environment how quick and agile are we
so from that point of view you're there
you need a transformation within
technology as a starting point so things
like DevOps processes automated testing
standardized and disciplined agile as a
methodology now it may sound quite
process-oriented and not that much to do
with smart contracts but actually unless
the banks move to that model and they're
partway down the road all these tech new
technologists are going to take 10 years
before they actually get implemented so
we need to move to this new model so
different parts of the bank move at
different paces we've already got parts
of many investment banks that are
already highly agile on what we need to
do is to expand that to the rest of
technology and have a business working
with technology so in terms of the
customers expectations I would say first
of all there's the employees
expectations and then then becoming
faster and more agile and reflecting
faster pace of change will enable us to
deliver different products the the
Millennials aspect and so on I don't
think applies so much to institutional
investors who are participants in
Investment Banking
there may be cases for example of people
looking to swap assets and they'd like
to do it on their iPad outside of the
trading desk but I haven't been aware of
that demand yet to agree with what Lisa
and yeah it's a slightly different
problem in in some of the more
investment banking asset management
fields you know for retail I mean I
think the you know one challenge I'd
throw out there is no the today you you
do need to understand the technology you
need you do need to be aware of where
the problems you know lose your lose
your private key and know you've you've
lost the asset that's tight to that so
so you know I think again it's it's an
opportunity for the for the banks and
the community to provide systems to
enable you know people to carry out
transactions on on these platforms in a
secure way with some level of guarantee
that that should something go wrong that
they have have recourse obviously you
know we don't we're not we're not
suggesting that we want to completely
control these things but we need to you
know provide enablers
you know I talked about before you know
it's its distribution of trust so but
but they're still you know there is a
need to still provide some of the key
services that we do today to clients
thank you very much in we have time for
one question
so the question was was a minimum
transaction volume so I think it depends
well how you're partitioning your system
in which use cases so there's mention of
a blockchain but the reality is there
are going to be many chains within that
for if you look at classical distributed
databases and assume a similar approach
is taken then you can imagine these
being partitioned so you can look at low
volume areas high volume I wouldn't
expect it to be used for high frequency
trading in appropriate for many years to
come
however if we're looking at you can look
at securities settlement where they may
be taking a hundred thousand
transactions in a batch pumping through
in a fifteen minute period you may yes
so but I don't actually think that's the
the challenge here I I think there are
different challenges rather than just
like because I've seen those being
solved and I've seen people running
etherium and other smart contracts
they're showing really high transaction
throughput and we've run this on some
nodes I think there's a different
challenge and it actually really given
the company here it relates to the
consensus and it's the granularity of
consensus that you're applying to it so
I think one of the computer science
problems is taking the granularity that
you've got from a banks perspective
which is the agreement whether it's an
an executable agreement the business
logic
so what consensus if I gave you an
agreement what consensus would you need
the parties that are party to that
agreement
whereas what you're looking here is the
next step is how many parties need to
agree to process that a bunch of
transactions so there's a little bit of
a mapping change as it goes down the old
model is your central came to
Clearinghouse that process it easy one
person with that you delegate it so the
scalability here I don't thinks the
number of transactions I think it's how
to work out the model that encapsulate
that idea that the consensus is at the
agreement and then work out what you
need to do underneath and maybe you know
if we say boss the combinatorial
explosion of every combination of
different power
parties and say create a chain for every
single one does that scalability make
sense so I think that would be a better
dimension of scalability to worry about
and then work out how to address does
that make sense
thank you all for your time