Blockchain The Engine of the Next Financial Revolution

[Music]

trust

trust is essential for us do you tell

someone a secret you do not trust

do you work for a company you do not

trust

do you have a bank account with a bank

you do not trust

i hope that all of you here can say yes

we trust them definitely

but not everyone in the world can say

that

2.8 billion adults in this world are

under-banked

this means that they do not have a bank

account or that they only have very

limited access to financial services

and many people out there do not trust

their bank

but the system of the financial services

is heavily built on the trust and even

if you trust your bank

do you trust the bank of your bank

the case we have out there is that our

system is built on trust and our trust

in intermediaries

trust and intermediaries we do not even

know

and that’s good that it was built like

that

then because we found the internet it

wouldn’t have been possible to send

money from a country to another one

because

how should that have worked with this

system that is out there at the moment

and is up and running for many many

years

we have a solution

but thanks to the internet and thanks to

a new technology that is up and since

2009 running without a single failure we

have finally a solution that it can

drastically change

today i would like to explain to you how

the existing financial system works in a

nutshell

how the new technology will work and why

the new way will be way better for all

of us

let us speak about peter

peter lives in zurich and maria lives in

los angeles

peter owes maria 100 us dollar and he

would like to send them to her

because they cannot meet in person he

uses his bank account

so he logs in in his online banking and

he sends the money to maria

is it that easy so we have just bank a

and bank b involved

definitely not

as mentioned the system is built on

trust in intermediaries so we have

minimum two and up to five more banks

involved in a single transaction from

switzerland to los angeles

and the crazy thing

it takes up to three days and costs in

average about 20 us dollar or more

so to send money from switzerland to los

angeles

three days 20 us dollar

if i would like to send her a message

peter to maria it works easy he takes

out his phone and he calls her he sends

her a whatsapp so we have the internet

for communication for data and

everything

but not for financial services

banks block us banks are expensive and

banks do what they like to do and they

would like to keep that power

but thanks to this new technology it

will change and if they fight it they

will not win this fight

but why is it that strict and why do we

have that central intermediaries in

between

if we look at the system it’s logical

because the bank in switzerland does not

know the bank in los angeles so how

should it be able to communicate with

them and how should it be able to send

money to them that’s why we need these

central counterparts in between where

banks trust

so in this example these four banks are

connected to a correspondent bank and if

they would like to send money from a to

b they always have to go through this

bank

and this bank takes care of the

transaction takes care of the general

ledger and knows which bank owes which

bank how much

but what happens if this bank goes out

of business

that’s the single point of failure we

have in the existing system

if one of these hundreds of central

custodians goes out of business we have

a problem and many banks and possibly

even we will lose a lot of money

and that’s definitely not necessary

anymore nowadays

so again if we look how this transaction

works

we can go in a plane in zurich fly to

los angeles and 12 and a half hours

later we are there but our transaction

is a two-stop flight do we like that

definitely not why should our money make

that so in this example as you can see

this money starts in switzerland stops

somewhere in europe stops in new york

and then finally arrives three days

later in los angeles

that’s definitely not a way how it

should be done

and there is out there a new technology

as mentioned up and running since 2009

24 7 without a single failure

and is it therefore simple or definitely

not

that’s an example to explain how this

new technology in the back would look

like

but again we can simplify that

because it’s an easy simple example

where everyone in the infrastructure is

connected with each other

if peter would like to send money to

maria directly he can do that if he

would like to send it to a bank he can

also do that he is connected to every

single participant

peer-to-peer in the system

and the great thing is if peter goes out

of business we do not care because all

other participants

have taken care of the transaction

know who has how much money know who has

sent to who how much money

and this technology is the blockchain

we heard a lot about it in the news

about bitcoin and all the other stuff

and yes bitcoin is an amazing use case

of the blockchain but it’s just a use

case and we will see way more out there

and there is already way more out there

so i would now like to explain to you

how it works in the blockchain

technology

so peter looks in his laptop and only

needs to know maria’s wallet address

this wallet address is nothing different

of an existing bank account number it’s

a number of a lot of signs and he will

put it in and will send her the money

and it arrives there

no intermediary is involved in this

transaction

very simple yes for a user it’s very

simple but it happens in between or in

the back it’s definitely way more

complicated

but again back to the system on the left

side we have this centralized system

that if this one little house makes a

mistake everyone loses money and on the

right side we have a system where

everyone is connected with each other

and if someone stops doing business we

do not even care because every

transaction already happened and nothing

can be lost because it’s already

transferred

to explain to you in a little bit more

detail how it works i really like to use

the example of a train

so every transaction is some kind of a

passenger

they walk in the train station and wait

for the wagon for the train

so finally a new wagon arrives

this wagon in the blockchain world would

be a block

the company who is responsible for this

wagon is a mining company

and they decide which transactions they

would like to take with them who pays

the highest fee who has a good amount

who has the right size of a transaction

that it fits in this wagon so they pick

the transactions

to take them in the wagon and then they

check everything and if it’s fine the

transaction and the block will be

approved and a new one will be added

for example in the bitcoin blockchain

that’s something that’s happening every

10 minutes

every 10 minutes we have a full

settlement of all these transactions and

they really move from a to b it’s like

if you would pick physical gold and

would bring it to your friend in los

angeles it’s not only in a booking

system a number it’s really there and it

has moved

nothing can be lost

but how is a block or a wagon verified

also there we have an amazing technology

behind

where we can see that again this wagon

comes the mining company decides which

transaction they would like to take they

check everything but then the amazing

thing happens they broadcast this block

to the blockchain

and every single participant acts as

like a conductor

they check if these transactions are

right if enough money is in this account

if the transactions paid the right fee

and if it should happen what’s written

there and they will verify it so we have

hundreds or thousands and in the future

possibly millions of participants that

will verify a transaction and therefore

again compare it one single regulated

company compared to a whole environment

a whole decentralized infrastructure

that verifies transactions isn’t that

way better

and this wagon will be added

day by day every 10 minutes for example

in the bitcoin blockchain in other

blockchains it takes way longer or is

way faster compared to the use case

different block times so different times

where we add new wagons are necessary

that’s growing and growing and growing

this train will never stop to grow and

the amazing thing is that’s what you can

see here every single transaction is

still in this wagon

and we can check them

next to the trust in the technology

and not in a centralized counterparty

anymore we have transparency

we can check what someone tells us if

someone tells us nowadays look here is a

print screen of my online banking i have

10 million in my bank account we cannot

verify that

thanks to the blockchain technology we

can tell him yes sir show me your

address

and i can verify it so we will go in a

decentralized financial system where

transparency is next to trust

something of the most essential things

and if you go back to the world map

how would such a transaction work

you can send money from

south america to russia from australia

to switzerland you can do whatever you

like and the amazing thing 24 7. if

sunday morning 2 o’clock you would like

to send money to your friend you can do

it nowadays you have to wait until

monday the bank opens again and the

payment infrastructure is up and running

and the money will be moved

the blockchain technology enables us to

have a system that is up and running 24

7

where we have way more trust in the

system because the technology itself and

not some shady centralized

counterparties take care of transactions

and we have a way bigger transparency

and therefore

illegit and illegal things cannot happen

at easy anymore

the best thing behind this you can

decide how you would like to do it you

can decide if you would like to open

your own bank account your own wallet or

if you would like to do it if a bank so

if you still trust your bank in the

future they will use the blockchain

technology and you will use them you

will not see a difference only that you

can send money 24 7 but if you do not

trust your bank or there is no

trustworthy player in your region you

can open your account with another

player or do it by yourself

you have the economical freedom to be

your own bank if you like

and wouldn’t that be great to get that

kind of freedom for everything we have

that freedom or for a lot of things we

have that freedom but nowadays not for

our financial assets

thank you very much it was a pleasure to

speak to you