The financial services industry is in a state of flux. We’re already moving into the second generation of blockchain, which is more exciting than the first. The first phase was very decentralized, with participants on disparate blockchains, whether permissioned or public, and none of them were talking to each other. The second wave will bring together more multi-node activity across tiers, across jurisdictions and across business activities. We at GMEX are very excited about that because we’re at the forefront of the wave.
Digital trading revolutionizes financial markets
Twenty years ago, we couldn’t have envisioned how smartphones would revolutionize the way that we communicate online and across networks. That’s where we are today in financial markets. There are many silos, and most don’t talk to each other effectively. Of course, there are networks that join them, but they’re incredibly inefficient and expensive, and they don’t facilitate the types of cross-border activity we could achieve if there were more seamless integration.
In contrast to the overall financial market infrastructure—which remains largely centralized—the whole construct of Bitcoin came about in a decentralized fashion. There may be a lot of new technology out there, but it’s balanced by the inertia in existing systems, processes and legacy mindsets. As many banks and exchanges wonder how they can enter the digital asset space and integrate that with their core business, their biggest question is how they can marry their current, centralized ethos with the decentralized ethos of the emerging digital financial ecosystem.
Conversely, new FinTechs often struggle with finding their place in the ecosystem. They may be innovative, but there’s still a “If you build it, they will come” mentality. Something may be technologically possible, but technology is just an enabler. It needs business validation.
At GMEX, we see this tension as an opportunity because the right answer isn’t the status quo on the traditional side, and it isn’t the decentralized Wild West. The right answer is somewhere in between, and that presents opportunity for both traditional financial services firms and FinTechs to create new products, new asset classes, new revenue streams. To get that competitive edge, innovation is key.
Blockchain technology helps reinvent trading
We see Blockchain as a key enabler to revolutionizing financial markets, moving from the old, analog version to the smart financial market that will facilitate more opportunity for all players.
Why blockchain? We believe we can use blockchain to reinvent how markets are traded, cleared and settled. And we see an opportunity to change the whole infrastructure and value chain for participants. But we wanted to do it differently, not just by automating something and putting it onto a blockchain.
Finding the right blockchain technology for the revolution
The IBM Blockchain Platform and The Linux Foundation’s Hyperledger Fabric exceeded our expectations. We needed a solution that could accommodate our focus on Java development and leverage the communal knowledge of the open-source environment ledger while applying our own intellectual property. The IBM Blockchain platform gave us the best of both worlds.
We’ve created middleware overlaid on the IBM Blockchain Platform that acts as a kind of glue between multiple liquidity pools and many custodians so they can now talk to each other. They can quickly move assets between multiple holding and trading environments seamlessly. It’s much more efficient than today’s decentralized construct, which currently results in multiple hours or even days of lag to complete a trade.
Near-instantaneous netting and settlement lead to huge efficiency gains, of course. But the economies of scale that result from connecting these infrastructures are immense, both in terms of cost effectiveness and future business opportunities. It increases trust, reduces risk and encourages a wider timeframe for digital asset trading, which can be 24 x 7 and global.
Riding the second wave of blockchain into the future of financial markets
This second wave of blockchain, facilitated by technology such as the IBM Blockchain Platform, provides more seamless integration between multiple nodes of activity in a very coherent fashion. We see a huge opportunity—especially when we apply revolutionary technology such as AI, Quantum and the ability to harness cloud as well as private networks—to transform the way that banks and exchanges conduct business.
Watch Hirander Misra, CEO of GMEX Group discuss the second wave of blockchain: