Blockchain & the financial web – dante’s nine circles of hell

blockchain & the financial web – dante's nine circles of hell

Against a background of rising demand in the financial web, Blockchain could become a means to help users achieve their aims. Doing so will mean starting today on the detailed work of rebuilding existing accounting systems.

If Dante had been left in charge of designing the image of Fintech, he would have arranged its participants like this. At the very top, he’d have put the visionaries – CEO’s transnational services, instant payments, mobile wallets, P2P, smart-contracts, and their kin. The overall rhetoric runs that the future begins tomorrow – which is just as many start-ups imagine things to be. Yet the moment they try to open a bank-account – or get still further inside a bank’s infrastructure, such as getting in touch with their IT-department, or Security – they began bashing their heads against lumbering business processes, a paper-chain of document processing, the extensive red tape procedures of ‘compliance’… along with the whole plethora of vintage business technology systems from the 1980s. When you come into contact with all this in practice, you may well feel that trying to change all these established systems is like navigating Dante’s Nine Circles Of Hell. It all means that start-ups who boldly declare that the future is digital, are, frankly, kidding themselves.

In fairness it should be mentioned that banks, too, also want things to be quicker – in digital form, secure, and fully controllable. Getting to that stage however – as we said at the outset – is going to take over a decade.

So what should be done to get there? It’s very important to build the infrastructure for accounting, synchronisation, and backups. This is very routine, and detail-oriented work is what’s needed to rebuild the accounting systems. When it is rebuilt, it has to become accessible and open to all. We need an analogy with the Internet, with its data transfer protocols over the network, mail protocols, and security protocols. All main components of web-servers are open and free-of-charge – because the Internet connects billions of people. Any of them can launch a website, without ever even thinking if they maybe need some kind of licence to do so. Exactly the same has to happen in the financial sector, to create a financial web.

How can banks and fintech gain from blockchain? There are three ways in which blockchain technology – which is already gaining popularity with start-ups – can help banks. The first way is upgrading security. All crypto-currency blockchain start-ups propose using digital signatures for managing their accounts. What this means is that they no longer use logins and passwords, but instead use digital wallets with their own keys as the means to manage their accounts. You have a signature – then you get access to the funds. No signature? No access to funds. It means you can’t get access to your funds, unless you’ve got the key. The next way is infrastructure (physical and software).The code which has been written by blockchain start-ups could be put to use by fintechs and banks for creating their own accounting and settlement systems. This all allows users to run the same software – but not on pricey IBM servers, but on much simpler and cheaper ones. The third way, although further down the road, is the complete deployment of blockchain as a means of data synchronisation between participants.

P.S. The philosophy stated above represents the values of Distributed Lab. That’s the reason why we have put our words into action, and developed the OpenbankIT system – a complete set of solutions for banks or fintech companies for issued and accounting for electronic money. It features all the client-side applications, software, processing operations, is fully Open Source, and requires no license fees. Any bank or start-up involved in the release of digital assets could use this set of solutions – from loyalty systems and complementary currencies to community coins. This is our contribution to the development of the financial web.

Illustration by Katerina Krashtapuk

Pavel KravchenkoCryptographer, founder of Distributed Lab