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