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“Create Not Only a Product on Blockchain, but a Business Model”

July 1, 2020

With benefits such as increasing security and transparency, enabling 24/7 liquidity, facilitating fraud prevention, and reducing operational costs, the practical use cases for Blockchain technology are potentially endless. David Vatchev, Venture Development Lead at F10 Corporate Member R3, provided glimpses into R3’s Blockchain ecosystem and the impact of digital assets on financial services during an online community session for the startups in the F10 ecosystem.

Over ten years ago, an anonymous author or a collective of authors using the pseudonym Satoshi Nakamoto published a paper on Bitcoin and the underlying Blockchain technology. According to the tech platform “Hackernoon”, Blockchain is a highly encrypted database that is divided into thousands of servers where every entry is verified by other users. The encryption ensures that the data is protected against unauthorized access and the mutual verification leads to more security. According to “Forbes”, the number one advantage of Blockchain is increased transparency: “In financial systems and businesses, this adds an unprecedented layer of accountability, holding each sector of the business responsible for acting with integrity towards the company’s growth, its community and customers.” Transactions on Blockchain must be agreed upon by the network before they are recorded. After a transaction is approved, it is encrypted and linked to the previous transaction.

Data on Blockchain is available to all participants who have access permission. Because Blockchain is a type of distributed ledger, all network participants share the same documentation as opposed to individual copies and the shared version can only be updated through consensus. When exchanges of goods are recorded on a Blockchain, an audit trail is created. This trail shows where an asset came from and every stop it made on its journey. Having historical transaction data can help verify the authenticity of assets. Due to its decentralized nature, Blockchain removes the need for intermediaries in many processes and increases efficiency. Blockchain provides an opportunity to revolutionize information sharing to help prevent fraud and unauthorized activity. In the last years, Blockchain has mainly been used in the banking sector in the areas of payments and transactions. Still, it could potentially be used in every industry where protecting sensitive data and cutting costs is crucial.

Trustless interactions should become a thing of the past

Despite numerous advantages, Blockchain is still met with scepticism, with the main bone of contention being the lack of use cases outside of the financial world. “Many people don’t necessarily see the advantages of Blockchain. As it runs in the background, the end-user will not notice the technology if it works well”, David Vatchev, Venture Development Lead at R3, explained during an online community session for the Startups in the F10 ecosystem. R3 leads the world’s largest Blockchain ecosystem comprised of over 350 tech firms and institutions collectively exploring DLT and embracing this technology to solve real-life problems. The vision of R3 is “a world where everyone can transact directly and privately with trust”.

The F10 Corporate Member aims to create an environment in which business partners operate in perfect synchrony, and trustless interactions are a thing of the past.David emphasized the impact of digital assets on financial services. Issuing a Blockchain token that digitally represents ownership of real tradable assets increases transparency and enables 24/7 liquidity, instantaneous settlements, wider investor bases, faster capital raising as well as fractional ownership while cutting operating costs. Companies working with digital assets must consider local and international regulations, platform integration, cyber-security, and design thinking. “We encourage Corda users to not only create a product, but a business model.” Startups play an important role in developing new business models that exploit the potential of modern technologies: “Some of the most exciting and innovative solutions are being pursued by Startups and brave entrepreneurs. These pioneers in digital transformation are agile, committed, and often apply new technology quicker than some of their more established peers”, David stated during the online community session.

These F10 startups have been successfully working with Corda

R3 Venture Development supports game changing Startups building applications on Corda. Among the R3 partners are the F10 Startups BlockState, LoanXChain, and VALK. BlockState and R3 have cooperated to create a platform that allows the transfer from Ethereum-based smart contracts to Corda. LoanXchain allows financial institutions to go beyond bilateral interactions through a multilateral marketplace. Their Corda-based platform digitally connects lenders and institutional investors, making the sale of loans and transfer of credit risk simple, fast, transparent, and accessible for smaller players.

VALK centralizes and automates all the tasks and processes regarding the management, trading and investment of unlisted assets such as private company shares, fund shares, real estate or infrastructure that are currently being done manually. The VALK platform is built on Corda. BlockState, LoanXChain and VALK have participated in our Incubation Program in Zurich.

Even while maintaining social distancing, F10 brings the financial technology community together. During weekly online sessions, the F10 startups have the opportunity to acquire new skills, gain valuable insights into topics such as remote sales, communication during crises or the F10 FinTech Sandbox, and connect with the F10 corporate partners, mentors and industry experts.

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