Tuesday, May 03, 2016

Blockchain protocol for financial firms released as open source software

By Anne Sherry, J.D.

The blockchain protocol developed for financial firms over the last 18 months is now available to the wider financial community. Chain, Inc., which developed the protocol in partnership with Nasdaq, Fidelity, Citi, and other financial firms, released the blockchain standard as open source software. The service promises to reduce costs and enable new product opportunities by enabling institutions to securely issue, transact, and store financial assets digitally.

Blockchain technology was invented by the creator of Bitcoin, who used the pseudonym Satoshi Nakamoto. (Unrelated to the Chain announcement, an Australian computer scientist named Craig Wright today came forward as Nakamoto, although Bitcoin experts and enthusiasts are skeptical.) A blockchain enables transactions to be recorded in a digital ledger that can span multiple organizations and is impossible to forge. Chain Open Standard 1 (Chain OS 1) promises to address key requirements of financial institutions:
  • Support for any asset in any market;
  • Role-based permissions for users;
  • Selective privacy so that only the parties to a transaction can view its details; 
  • Immediate transactions with absolute finality;
  • Smart contracts with automatic enforcement and no counterparty risk;
  • High scalability;
  • Perfect auditability;
  • Integrated compliance data;
  • Integration with existing financial systems and other blockchain protocols.
Chain's website provides some examples of financial transactions that can use Chain OS 1, from a simple transfer of assets to a collateralized loan.

Last year, Nasdaq announced that its partnership with Chain would allow stockholders to seamlessly transfer securities between entities, while also providing companies with a complete historical record of the issuance and transfer of their securities. Capital One, Citigroup, Fidelity, First Data, Fiserv, MUFG, State Street, and Visa also partnered with Chain during the development process.