Blockchain Technology – What Is It and How Will It Change Your Life? by Jan Skoyles
Blockchain technology – What is it?
Latest developments – Royal Mint Gold & CME, Goldman Sachs and Santander
Why do we need it? It’s about value
Blockchain is an extension of economics
Blockchain allows us reduce uncertainty and risk
How will it change your life?
For those of you who follow anything to do with blockchain and blockchain technology, you will know that the space has had its ups and downs in the last couple of weeks.
The exciting news is that two major players in the gold market, the Royal Mint and CME Group have announced a blockchain-backed gold project, and the surprising news is that the R3CEV consortium is apparently under threat.
Making a mint on the blockchain
The Royal Mint and CME Group have announced that they are working on a blockchain project together. The project will see the creation of Royal Mint Gold (RMG) digital tokens which will each be backed by 1g gold.
We will look at the Royal Mint’s announcement in more detail shortly, particularly at how they expect the implementation of a blockchain-backed platform to mean that they are able to remove storage fees.
But the focus of today’s research note is to look at why blockchain is grabbing everyone’s attention.
The use of blockchain technology in the gold space is nothing new, it is something we discussed recently in regard to changes in the gold market and the risks posed to the London gold market.
However, the move by the world’s oldest gold organisation is an illustration of just how complimentary the technology that was first known for backing ‘digital gold’ (bitcoin) and the longest surviving money, really are.
Goldman Sachs and Santander Drop Out of R3 Consortium
In recent weeks, both Goldman Sachs and Santander have dropped out of the R3CEV consortium, whilst a further five (including Morgan Stanley and National Australia Bank) are also rumoured to be about to leave.
R3 is a blockchain company formed of a consortium of near 70 banks and financial institutions (including those focused on insurance). It leads research and development in distributed ledger technology, and is currently raising $150m.
However the move by those mentioned above is a positive sign, and one that shows the blockchain (or distributed ledger technology) industry is maturing. Shake-outs are inevitable in new technology industries as institutions, governments and regulators negotiate their way through new developments and working out what it means for them.
Those companies that are set to leave the consortium are still committed to the ground-breaking technology. Goldman Sachs and Santander are both, for example, still shareholders in Blythe Masters’ Digital Asset Holdings. The former co-led a $60 million investment into the business alongside IBM.
Even CME Group, as mentioned earlier, are involved in multiple blockchain projects, as a member of the industry body Post Trade Distributed Ledger Group (PTDL) (fellow members include the London Stock Exchange, Euroclear and HSBC) and the Hyperledger project.
But what is it about this technology that is so groundbreaking and has the likes of Goldman Sachs investing millions and ex-senior JP Morgan banker, Blythe Masters breaking rank and joining a (well-funded) start-up?
Why are established gold-market participants deciding this is the technology they need to bring the space into the 21st century?
Uncertain about blockchain?
Bettina Warburg, presented a TED Talk over the summer in one of the best explanations we have seen for a long-time, that will help you to understand the power of blockchain technology.
Ultimately blockchain’s genius comes down to its ability to reduce uncertainty in the transfer of value – whether that value is information, a digital asset, a contract note, an agreement or a deed – you name something that is effectively information and it has value.