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Wednesday, 25 May 2016 16:06

Teaching Banks and Their Biggest Customers What the Blockchain Is Really About Featured

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Note: Those who can't wait until the end of this article can download "Banco Popular and the Potential for a European Bank Crisis" by clicking the link.

I met with the second in charge of one of the world’s largest money center banks yesterday. It was an enlightening discussion for both of us. Bank management got to glimpse the true reality of disintermediation as this autonomous technological paradigm shift sweeps over the street, and I was enlightened to the fact that bank management really does get it – or at least will get it if they are presented with a realistic story. I have those in droves. He prefaced the discussion with stark disclaimer, “Before we get started, I just want you to know that I know that Blockchain is a bunch of hype BS!”. It appears that is the reason why I was called in.

You see, from his perspective – or at least the perspective that has been sold to him – Blockchain tech is a bunch of overblown BS. The technology vendors prominent in the day have been pushing blockchains and related tech as a panacea for banks’ legacy bank-end systems. Not only am I in agreement with this CXOs assessment of the tech’s utility as sold, but even if we’re all dramatically wrong and the implementations are massive successes, it will all be for naught.

This is what the CXO didn’t get until I enlightened him. You see, blockchain technology, and any properly implemented software application written on top of it, is autonomous in nature. That is, the users are empowered to retain maximum control of their assets, information and transactions. This is Peer-to-Peer technology, and to force it into a centralized, hub and spoke model (or anything similar) neuters it at best, destroys it at worst. The CXO sees blockchain tech as forced into a centralized economic model, hence sees failure, or at best mediocrity attempting to replace a legacy system. I painted a very different picture for him. Imagine this technology released in its true P2P form, not to the banks, but directly to the banks’ clients so they can use it to do what it was meant to do – eliminate the middleman!

The bank exec said, “Do you mean us?” I said, “Absolutely”. He said, “So why should I believe your pitch? How do I know this is actually doable?” I said, “Don’t believe me. Our next meeting may include some of your most lucrative clients trading without you. Think about the risk/reward ratio here. You can invest $25 million in us and there’s a 90% chance that we fail, with an absolute loss. There’s a 10% chance that we succeed and 15% of your clients trade through us at 1/3rd the cost. That’s a minimum of a $1 billion quarterly recurring loss, likely growing linearly!” I said, “Do the math!”

I say the same to a hedge funds, family offices and most importantly, banks.

Another point that came up was the ancillary services that came with prime brokerage with a bank. It was thought that the bank’s sell side research was sought after as a value add to buy side clients, and as an extension, by us who were dismantling the prime desk apparatus. I couldn’t disagree more! We provide buyside orientated research that is second to none, and have been doing so for a decade.

We've decided to release a recent report on EU banks to give those who are not familiar with us a taste of the type of research that comes part and parcel with trading on the Veritaseum platform. Read Veritaseum Blockchain-based Bank Research Hits Another Homerun - Banco Popular Shown to be Bear Stearns Redux! for a background to the report, then click here to download it directly - for free: Banco Popular and the Potential for a European Bank Crisis 1.0. Please keep in mind that the company dropped in excess of 14% after it reported earlier this month - exactly as we anticipated in this report! 

Oh, and don't forget, the paradigm shift is already happening... Wall Street Disintermediation Arrives as Hedge Fund Trades P2P Via Blockchain, Without a Bank or Broker

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