Page 21 - February 2018 Disruption Report Flip Book

THE FUTURE FINANCIAL INFRASTRUCTURE FJEABNRUUAARRYY 22001188
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TIMELINE OF BLOCKCHAIN EVOLUTION AND SMART CONTRACT IMPLEMENTATION
Figure 8. Timeline of Blockchain Evolution and Smart Contract Implementation
Mainstream adoption begins
Take-off
2020
Experimentation
2018-2019
Origin
1997
Nick Szabo coins the idea of smart contracts
2009
Satoshi Nakamoto introduces the concept of blockchain
Basic smart contract capabilities added to Bitcoin
Smart Contract solutions introduced
R3CEV initiative consortium of banks, insurers and IT service providers is formed
Regulations and laws to bring blockchain and smart contracts under the purview of law arrive on scene
Expected first in-production implementation of smart contracts by financial services firms
Mainstream adoption of smart contracts begins
2015-17
Emergence of new products and services enabled by smart contracts
2014-15
2012-14
Banks and other companies set up labs to develop proofs-of-concept (POCs)
Several POCs succeed, implementation gathers speed
Source: Capgemini Consulting Analysts Source: Capgemini Consulting Analysis
“Crossing the chasm” to widespread adaption of blockchain in mortgage lending requires a number
The DAO Incident: Governance Lessons for the Financial Services Industry
of successful pilot implementations before this technology achieves scalability. Mass adoption of blockchain technology will be largely driven the creation of an open ecosystem into which suppliers
On 17 June 2016, a smart contract on Ethereum’s public, permissionless blockchain was hacked and a share of investors’
funds, valued at neaarlny d$5a0gemniltlisonc,awnadsemlivoeverdautothaosriutab-ticvoentdracttac, olonatrnollaedppbryovthaelshacnkdere. nWdh-itleo-tehendfucnudstocomueldr.n(oHt obuesingWire,
immediately accessed by the hacker because of checks built into the contract, the hack has had far-reaching implications.
Rahim Kaba, 10/27/17; Standing Up a Mortgage Servicing Platform, Matt Shaw, 10/17/16; How While such an attack is less likely to occur in a permissioned ledger network, the incident has served as an alarm for smart
Blockchain Would Improve the Mortgage Process, Synechron, May 2017; Smart Contracts in contract practitioners. Amidst highlighting the technical complications and difficulties with implementing smart contracts, the
Financial Services: Getting from Hype to Reality, Capgemini Consulting, August 2017) event also highlighted the significance of strong governance. For instance:
ƒ Roles of participating institutions: The financial institutions that come together to operate on one smart contract platform
must have clearly defined roles and responsibilities and ensure that all norms related to creation, execution and annulment of
According to Mortgage Finance Gazette, the technology hurdles that need to be overcome to smart contracts are well-defined. According to Trent McConaghy, Founder and CTO of BigchainDB, “Governance shouldn’t
integrate blockchain platforms into the housing finance industry include:
be an afterthought. It should be at least 50% of the conversation. When you don’t design for governance, the result is not no governance. The result is bad governance.”
ƒ Checks and balances: Due to a security feature of the Ethereum smart contract, the hacker was not able to move the hacked funds for 27 days, giving the community precious time to act, rewrite the rules and rollback the attack. Economic impact of failures should be proactively gauged and features need to be built-in to ensure corrective action can be taken by authorities to avert or limit losses to the transacting parties. These checks will have to be designed while keeping in mind the need for seamless execution.
Source: Ethereum and Slock.it blogs; Capgemini Consulting Interviews, June-July 2016
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