Advancing the case for distributed ledgers5 proving the case for distributed ledgers leaflet

Featured Specialists Nick Weisfeld

Julian Eyre

Head of GFT’s Data and Blockchain Practices

Head of GFT’s Commodities and Blockchain Practices

Nick has been leading GFT’s Data Practice for the last four years with a focus on bringing new and innovative technology and services to market. With extensive experience identifying and responding to industry trends early, Nick has built successful propositions with Big Data analytics, simplification and automation themes.

In partnership with the FinTech community and Google’s Cloud Platform, Nick helped develop GFT’s Blockchain Incubator that aims to advance blockchain ideas and insights through rapid prototyping and performance benchmarking. Some of the most recent use cases to pass through the incubator have been ideas related to commodities, clearing and settlement. Most recently Nick has been building propositions to improve customer experience through advanced analytics, automation and machine learning techniques.

Julian has extensive experience in working with clients to support innovation and business solutions across the enterprise. A successful Sales and Business Development Manager, Julian creates longstanding customer relationships between GFT and its clients, and works proactively to identify their key business needs and the solutions necessary to meet tactical and strategic requirements. Julian joined GFT UK from OpenLink in 2015, the leading Energy Trading and Risk Management solution provider.

At a glance: Blockchain @ GFT ■■

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Blockchain business and technical advisory Blockchain lab services and incubator Specialist in technical architecture, interoperability, smart contracts and scalability Rapid prototyping services from nearshore locations reducing time to market and cost Proven experience delivering blockchain solutions to financial services

About GFT GFT is one of the world’s leading solutions providers in the finance sector offering consulting, implementation and maintenance for a broad range of IT applications.

Combining technological expertise and seamless project management with a deep understanding of the financial industry, GFT is a reliable partner for well-known companies all around the globe.

Headquartered in Germany, GFT has stood for technological expertise, innovative strength and outstanding quality for over 25 years. › gft.com

Advancing the case for distributed ledgers Defining viable adoption strategies for blockchain

Seven potential distributed ledger adoption models Adoption model

Description

Example

IP ownership

ROI model

Open sourced

Solution developed in collaborative public manner

Linux foundation

Open source

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Initial seed investment Ongoing contribution community based Revenue generation not always clear at outset

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Promotes community contribution to development Adoption velocity set by those that contribute Builds technical competency and community in technology

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Licenced product

Solution developed by a privately funded FinTech

Ripple

Licenced by FinTech or Patented by entity

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Circle

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CobaltDL

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Initial seed investment for a stake in FinTech Licence revenue drives further investment Patent revenues or ‘legal’ revenues

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IP ownership is clear As a private company, the drive to adopt is a fundamental objective of the organisation As a private company, the efficient use of resources should ensure that a ‘fail-fast’ R&D strategy delivers a commercial project as quickly as possible

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Platform-as-a-service

Distributed peer-to-peer funded model

Consortium based

Existing centralised utility

Moving a defined solution to a platform to deliver a range of products or solutions

Amazon moving from a bookshop to a marketplace

A model that brings investors and innovators together in a distributed peer-to-peer innovation accelerator

DAO

Solution developed by an industry consortium

Solution developed by an existing centralised utility

Platform IP owned by platform provider. Products sold on platform owned by produt developers

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IP owned by all investors

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Swift

Consortium owned or legal framework exist within consortium to protect and share IP

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R3 CEV

Products owners pay commision to the platform provider

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Costs are met by all investors proportional to their investment Future revenues are met by all investors proportional to their investment Investors vote on those ideas to move forward and those to be discarded

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Up front investment channelled through consortium Consortium could choose to either sell concept or create a utility to commercialise investment

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IP owned by utility

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CLS

Initial investment funded by profits of

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As this is in effect a centralised service moving to a distributed service, ROI can be controlled through transition plan

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Adoption through a Service Provider

Solution owned by a light weight service provider with a remit for driving adoption as well and platform maintenance

Linux -> Red Hat

Initial IP owned by inventor, then sold or licensed to a service provider. Service provider to develop enterprise-ready solution

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Requires up front investment to prove solution works Ongoing investment funded by service provider onboarding of new participants to enterprise-ready solution

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Democratic innovation strategy Great for distributed ledger solutions that are aimed at public networks Great source of attracting large volumes of investors As large volume of investors and individual commitments are lower, there is less risk to each investor

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For innovation phase, a good mechanism to share ideas Also good mechanism for proof-of-concepting ideas

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IP ownership is clear and leads to a recognised marketplace to connect supply to demand Wide adoption of the platform

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No issues with IP ownership Drivers for change is for utility to be leading disruption rather than to be left behind with an outdated business model Existing revenue flow can fund R&D and adoption Utility already has participants in its existing model and is therefore arguably in the best position to drive through adoption Participants to existing utility model are pushing for reduced cost of utility Existing utility understands the industry from the middleman perspective and is therefore the change SME

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Service providers incentive for driving adoption is clear and does not suffer from protectionism or ‘navel-gazing’ Fail fast approach… if business model does not live up to business plan then re-plan or fail Simplified business model Vested interests are transparent

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Potential to drive blockchain adoption

Prevents IP ownership concerns from competition Less central control to drive further improvements No clear driver for adoption Who governs security and onboarding?

Improvements slow to realise

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Nice in principle, but slow to adopt in reality

Privately owned licence model is possibly not the best model for a distributed ledger business model Potential confilct with ‘principle’ of opensource technology Product must be compelling for a licence model to deliver a quorum of participants Difficult for FinTechs to show their product’s future revenue stream and therefore to generate the seed funding in early days If there are two competing products, how will these two ledgers interact?

Without cross industry standards, the product could become obsolete once a standard does appear Possibility of litigation risk

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A focused and efficient commercial approach, however this strategy does not inherently drive collaboration between participants

Requires the platform to be widely adopted by both product companies and customers Difficult to achieve critical mass

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Good potential

Not widely used in financial services Open to fraud May not deliver the level of reassurance in product required for adoption in financial services

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Excellent strategy for commercialisation on a public blockchain. Less clear how this would drive adoption in financial services

Ultimately a new business model is needed to drive adoption Consortium can become a ‘talking shop’ with limited progress on real-world solutions If ideas do not become a reality fast then participants lose interest

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Good in ideation phase, but limited potential to drive real-world adoption

Limited driver for change as existing centralised business model delivers profit Radical shift in business model from centralised to distributed

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Promising, but will the drivers for change outweigh existing business model protectionism?

If adoption strategy not achieved then investment will dry up fast and solution will fail Requires service provider to invested up front to build critical mass

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Promising business model for distributed ledger adoption