Nasdaq to Push Forward with Blockchain Applications

Bitcoin Magazine
Nasdaq to Push Forward with Blockchain Applications

On May 11, the leading stock exchange Nasdaq announced that it would begin experimenting with the blockchain technology that powers Bitcoin. The Wall Street Journal reported that Nasdaq will start with a pilot project in Nasdaq Private Market, a recently launched marketplace that handles pre-IPO trading among private companies.

“Utilizing the blockchain is a natural digital evolution for managing physical securities,” said Nasdaq CEO Bob Greifeld in the announcement. Speaking with The Financial Times, Greifeld noted that he wants Nasdaq to be “a leader in the field.” He added that the network could potentially revolutionize the time it takes to finalize deals on U.S. securities markets.

“I am a big believer in the ability of blockchain technology to effect fundamental change in the infrastructure of the financial services industry,” said Greifeld. “Clearinghouses are a wonderful invention, but if you have a public ledger that is trusted, you can evolve back to a bilateral (trading) world but proceed with instantaneous settlement. We currently settle at T+3 [within 3 days]. Why not settle in 5-10 minutes?”

The Financial Times notes that shortening settlement times for trading could reduce the risk that counterparties would not be paid, while also cutting the amount of collateral, or insurance, used to back trades. For the Nasdaq Private Market, using the blockchain means transforming the recording of transactions from paper certificates and spreadsheets to an audited record of the lineage of ownership of private securities.

The Financial Times’ article includes a video with explanations about Bitcoin and the blockchain. The video notes that everyone from banks to stock exchanges and Silicon Valley technologists are starting to make bets on Bitcoin companies.

David Birch, Director of Consult Hyperion, a specialist electronic transactions consulting firm that advises governments and large companies on electronic identity and electronic money, believes that the real value of Bitcoin is independent of the highly volatile exchange rate of the bitcoin currency.

“I think when you see people investing in Bitcoin, it sounds like they are investing in the currency,” Birch says in The Financial Times video. “But I think you’ll find they are not really. The institutional money that is going in, is going into the underlying technology, not the payment instrument itself. So, investing in Bitcoin doesn’t really mean investing in bitcoin. It means investing in what they call the blockchain technology, which is the new technology that sits underneath Bitcoin.”

Birch acknowledges the importance of bitcoin price as a means to incentivize end-users to participate in keeping the Bitcoin blockchain going, but he is persuaded that “in the long run, that is unsustainable.” He notes that the Bitcoin blockchain is not the only blockchain, but there are other blockchains and other ways of incentivizing people to maintain blockchains.

It appears that Birch agrees with the growing persuasion, in the financial and regulatory sectors, that the promising blockchain technology will eventually have to be adapted to non-Bitcoin blockchains with different features, more appealing to the financial mainstream. In a recent research paper titled “One Bank Research Agenda,” the Bank of England called for further research to devise a system that could use distributed ledger technology without compromising a central bank’s ability to control its currency.

Nasdaq isn’t planning to develop an alternative blockchain. Rather, it plans to leverage the colored coin protocol Open Assets, which works on the original Bitcoin blockchain.


Photo bifshadow / Flickr

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Xapo Adds Visa Founder and Former Citibank CEO to Advisory Board

Universal Bitcoin services startup Xapo has announced that former executives from Visa and Citibank, alongside a former secretary of the treasury, has joined the company’s board of directors.

In a Xapo statement, Visa founder Dee Hock, former Treasury Secretary and President Emeritus of Harvard University Lawrence H. Summers and former Citibank CEO and Chairman John Reed, said they joined the company because of the potential of Bitcoin’s technology and currency to advance financial services.

Reed highlighted how Bitcoin could change financial services, noting they have “remained largely untouched by the digital revolution.” He added that Bitcoin is a large improvement over the “historical form of currency,” highlighting the digital currency’s scarcity and divisibility.

Summers, who also serves on the board of Bitcoin startup, 21 Inc., made mention of Bitcoin’s payment network being the first time someone could send money without having to rely on a third party, which historically have been banks, clearinghouses or third-party payment networks. In a Xapo blog post, he added that this peer-to-peer (P2P) aspect could soon cause “many billions of people sending bitcoin every day as easily as they currently send a text message.”

“We live in the 21st century but are still using command and control organizational structures from the 16th century,” Hock said. “Bitcoin is one of the best examples of how a decentralized, peer-to-peer organization can solve problems that these dated organizations cannot. Like the Internet, Bitcoin is not owned or controlled by any one entity, so it presents incredible opportunities for new levels of efficiency and transparency in financial transactions.”

Global Bitcoin Services

Xapo offers a suite of Bitcoin services, including a wallet and connected debit card, merchant payment processing, and secure bitcoin storage. The company is best known for its bitcoin cold storage service for individual and institutions with large amounts of bitcoin.

Since its founding in 2012, the company has raised $40 million from a large selection of tech and financial investors, including PayPal co-founder Max Levchin, Yahoo co-founder Jerry Yang, Benchmark and Greylock Partners. The new additions to Xapo’s board will be joining Ribbit Capital Managing Partner Meyer Malk and Benchmark General Partner Matt Cohler, who joined the company earlier this year.


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Is Goldman Sachs Flirting with Bitcoin, or the Blockchain?

The New York Times technology and finance reporter Nathaniel Popper’s new book “Digital Gold: Bitcoin and the inside story of the misfits and millionaires trying to reinvent money” has been praised as one of the best Bitcoin books to date. Popper tells the story of Bitcoin from its geeky, libertarian early days to the beginnings of the current phase marked by significant venture capital investments and growing adoption by the financial community.

Popper’s book contributes to the ongoing Bitcoin vs. blockchain debate. Once a bitcoin-like digital currency is adopted by banks and governments, will it still be recognizable as bitcoin, or rather become a sanitized blockchain controlled by central banks, with all the troublesome features of bitcoin removed?

“A company like Goldman Sachs or JPMorgan is hesitant to rely or work with a financial network in which the people keeping it alive are essentially anonymous,” says Popper in a Forbes interview. “Banks have to know who’s transacting and flag it if someone suspicious is involved in the transaction. But it’s quite easy in Bitcoin to have an identity tied to an address in a way that would make a bank feel comfortable.”

Popper released previously undisclosed information in a section of his book, re-published by American Banker magazine with the title “When Goldman Sachs Began Flirting with Bitcoin.”

Goldman Sachs is one of the most respected financial companies in the world, often considered as epitome of the best – and the worst – of today’s financial system. Therefore, Goldman Sachs’ take on bitcoin can be considered as representative of the financial industry as a whole.

Recently, after stating in a report that Bitcoin could shape the future of finance, Goldman Sachs participated as lead investor in a $50 million funding round for startup “Bitcoin bank” Circle in one of the highest profile investments in a Bitcoin company to date.

Financial operators are attracted by blockchain-based financial networks with no single point of failure, which could keep running even if one of the participating nodes stops working or is taken out. They are also attracted by the relative speed and low cost of blockchain transactions.

It currently takes the bank three or so days to settle stock trades, says Popper. “What if that could happen instantly and be recorded on a blockchain for everyone to see?”

But, according to Popper, Bitcoin remains a thorny issue for Goldman Sachs, JP Morgan and other top financial players. The problems are Bitcoin’s potential for anonymity, and the fact that the Bitcoin blockchain is “powered by thousands of unvetted computers around the world, all of which could stop supporting the blockchain at any moment.”

Popper reports that JPMorgan and other major banks envisaged a new blockchain that would be jointly run by the computers of the largest banks and serve as the backbone for a new, instant payment system without a single point of failure. The new blockchain, decentralized but closed, would offer the benefits of the current Bitcoin network without relying on end-users for its operations.

IBM has recently developed a similar concept for a non-Bitcoin, closed blockchain for central banks. Even governments are warming up to the idea, with rumors of “Fedcoin” in the United States and some kind of “Eurocoin” in Europe, especially in financially troubled economies such as Greece’s.

In a research paper titled “One Bank Research Agenda,” the Bank of England called for further research to devise a system that could use distributed ledger technology without compromising a central bank’s ability to control its currency.

It appears that financial institutions, central bank and governments are, indeed, flirting with the blockchain but determined to leave the open, pseudonymous and peer-to-peer (P2P) features of Bitcoin out. If so, Goldman Sachs’ investment in Circle could be seen as an intermediate, preparatory step to test the waters before implementing a non-Bitcoin blockchain.


Photo by Laslovarga / CC SA 3.0

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Bitcoin Gains Traction amid Steady Growth in Indonesia

Indonesia, one of the world’s most beautiful archipelagoes and travel destinations, has had a consistent increase in bitcoin adoption at popular tourist spots including Bali, Jakarta and Denpasar, since the launch of BitIslands in March 2014.

Initiated by the largest Indonesian Bitcoin exchange Bitcoin Indonesia, the project was sponsored by leading Bitcoin merchant platforms and mobile services in Asia, including a Singaporean startup Coin of Sale, Artabit, CoinPip, Quantified, Tukarcash and Bitwyre. Since 2014, Bitcoin Indonesia continued to aggressively push the project in Bali, where BitIslands launched a bitcoin Information Center and Bali’s first offline Bitcoin exchange.

Due to the increase of bitcoin’s market awareness and merchant adoption, the majority of the locals started to use bitcoin online, and began to appreciate bitcoin’s low transaction fees and speed, The Wall Street Journal reports.

“Most Indonesians currently use bitcoin to pay for services online, such as web hosting. They can also use the digital currency to book hotel rooms through travel websites hosted overseas rather than use credit cards, which only a small percentage of the population currently own,” the Journal article says.

Furthermore, major bitcoin exchanges such as Bitcoin Indonesia have seen a substantial growth in both the number of users and daily trading volumes. The largest bitcoin exchange in Indonesia currently trades around 200 bitcoin daily and supports more than 56,000 users.

“Many people think that Bitcoin is unheard of in Indonesia, but the fact is its popularity is soaring now,” Bitcoin Indonesia CEO Oscar Darmawan said.

In September 2014, several projects emerged to increase bitcoin mainstream adoption in the nation, by allowing Indonesian residents to purchase bitcoin at popular stores or tourist spots. The project ran by Bitcoin Indonesia enabled users of its exchange to purchase bitcoin at any of the 10,000 Indomarket convenience stores via a partnership with iPaymu, a merchant payment platform.

Such services, along with the rising volume of Bitcoin exchanges, influenced Indonesian merchants to accept bitcoin in other parts of Indonesia apart from Bali, where most of the Bitcoin projects began. Currently, Indonesia has more than 50 Bitcoin merchants, and the majority are located in Denpasar.

Rise of Bitcoin Startups

Since early 2015, some Bitcoin startups began to relocate to Indonesia, targeting the poor banking systems and payment infrastructure of the country. One of the startups was Blossom, which recently moved from San Francisco to Indonesia to offer the country’s first bitcoin-based global lending/investing platform.

Blossom connects international investors to small businesses in Indonesia which are ready to launch. Through an established local microfinance institution, Blossom delivers the bitcoin funds to the businesses. After 12 months, profits from the businesses are collected to be distributed to the investors, with around 7.5 percent to 12.5 percent in return.

“In conventional investment, I have to rely on the statements and numbers publicized by my partners. With Bitcoin, it’s clear to everyone what’s going on,” said founder Matthew Martin.

As the number of bitcoin merchants and trading volumes continue to grow at a consistent rate, Bitcoin startups and establishments, including Bitcoin Indonesia, aim to achieve mainstream bitcoin adoption in popular tourist spots in the country.

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BitSent Expands its Fleet of Bitcoin ATMs to British Columbia’s Simon Fraser University

One of Canada’s first companies to launch Bitcoin ATMs across the country is expanding its fleet of Lamassu-brand ATMs to Vancouver, British Columbia’s Simon Fraser campus bookstores in Vancouver, Surrey and Burnaby.

BitSent now has Bitcoin ATMs in 11 locations across the country and is looking to expand internationally in 2015.

While other Bitcoin companies are experimenting with newer technology such as QuadrigaCX’s SumoPro Bitcoin ATMs, BitSent has chosen to stick with the Lamassu model despite some hiccups in the operation and maintenance of the earlier models.

Their Simon Fraser Bookstore locations will also be the first university bookstore to accept bitcoin as payment for books and other products carried in their stores. Mike Yeung, the founder of the Simon Frazer University  (SFU) bitcoin club, expressed his excitement to Bitcoin Magazine. “As the founder of SFU’s Bitcoin club I’m proud that SFU has the first university administered bookstore in the world to take Bitcoin for purchases.”

Silicon Valley North – Waterloo Innovation Triangle

BitSent is one of the new pioneering high-tech companies thriving in Ontario, Canada’s innovation triangle just west and north of Toronto.

Also known as “Canada’s Technology Triangle” the area is a hotbed of new and future tech startups and includes the towns of Waterloo, Kitchener and Cambridge.

The best-known member of this network is BlackBerry, but the area also includes development offices of established companies such as Microsoft, Google and Oracle.

The region is home to close to 1,000 companies that generate about $30 billion in annual revenues. In addition to BlackBerry, the Waterloo area has launched hundreds of successful tech startups, including OpenText, Christie Digital, COMDEV International and Clearpath Robotics.


Photo Soggybread / CC BY-SA 3.0

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