For this week’s episode, we spoke to Steve Pomfret, CEO at Cygnetise. Steve describes himself as a “process guy” with over 18 years of experience in bringing about operational change (efficiency and de-risking) at reputed banks and brokerage firms.

After learning about blockchain, Steve spotted an opportunity to apply his skills and learnings together with blockchain to streamline processes within the financial ecosystem.  Presently, Cygnetise has one blockchain application used for management and distribution of authorized signatory lists such as delegated authorities, bank mandates etc.

 

What is blockchain?

According to Steve, blockchain has 4 pillars –

* Decentralised database

* A centralized database allows users with requisite permissions to add, remove, edit and view data (think of a spreadsheet on your computer!)

* A decentralised database is not owned by a single party. Hence, each party, with requisite permissions, can add and view data. There is a record (time-stamped audit trail to document modifications.)

* Distributed Ledger

* The key feature of blockchain for commercial applications – under traditional centralized systems of record, for a transaction between two parties to take place, there would have to be a debit and credit effect recorded. However, with a single shared database (as in the case of blockchain), data doesn’t need to move around.

* Immutability

* Numerous blockchain applications in insurance today exploit the immutability of blockchain (such as FlureeDB, which uses DLT-enabled databases.) Blockchain has an in-built audit trail that is timestamped.

* Smart Contracts

* Smart contracts are pieces of code that allow execution of certain actions conditional on certain pre-specified conditions being met.

* With appropriate (legal) documentation, smart contracts may also serve as (trigger based self-executing) legal contracts – this is the notion of Ricardian contracts.

 

Lack of universal terminology as a barrier

Steve makes an excellent point - since blockchain is a nascent technology, there are no universally accepted definitions for key concepts. To begin with, blockchain purists and business practitioners disagree on whether industry deployments of “blockchain” are “blockchain” or “DLT” projects.

As Steve points out, so long as the terminology used is clarified by the concern parties, the terminology itself doesn’t hold much significance.

 

Barriers to adoption of blockchain across industries 

“Part of the adoption (of a new technology) is to break it down into something that is useful at a process level and then you can build and evolve as opposed to revolutionize.”

 

Blockchain as a nascent technology

Steve recalls the first time he read about blockchain in a newspaper – the article spoke about how blockchain would “revolutionize” trade, clearing and settlement process within the banking ecosystem.  His initial reaction was that of surprise – as he rightly points out, how could you realistically expect hundreds of ecosystem participants spread across the world to each adopt a new technology almost overnight? In his opinion, such claims are equivalent to stating that it would be possible to build Facebook overnight.