Deutsche Bank has moved its blockchain project out of the proof of concept stage, according to the bank’s head of disruptive technologies, who also warned that the distributed ledger blockchain technology is still five to ten years from widespread use.
Deutsche Bank began test development of the distributed ledger technology in a set of labs in Silicon Valley, Berlin and London in 2014.
“We are not approaching technology just because it is cool to play around with,” Sajindra Jayasena, head of disruptive and digitisation for global transaction banking at Deutsche Bank told the audience at MarkLogic World in London this week. “We are focusing on solving business problems: reduce the cost base, improve efficiency.”
A graph on the Deutsche Bank website highlights a range of potential applications of blockchain in the financial sector. This includes settlement of trades in shares and derivatives, implementing transparency requirements for trading in financial instruments, settlement of bond trades and minimising risk of default via smart contracts.
Regarding Deutsche Bank's specific use cases for blockchain, Jayasena said: “We first looked at how this technology offers verifiability, immutability and transparency across multiple parties so what that offers is a digital disintermediary. So looking at post-trade execution, how to disintermediate a clearing offering on services while achieving consensus when you can’t trust both parties.”
Jayasena said that Deutsche Bank’s blockchain project is only 24 months from being ready to launch. However, the regulatory and legal framework to deploy it is more like five to ten years away. “But we still have to be ready,” he added.
“On the non-technology side there are legal aspects to look at,” Jayasena said when speaking specifically about the emergence of computerised 'smart contracts'. “How can we trust a code rather than a legal document?
“That is a gap that needs to be fulfilled from a legal perspective. I know that quite a few legal firms are beginning to fill in that gap because the current system has existed for hundreds of years and how do you change that?”
Speaking to Computerworld UK, Jayasena voiced concerns over how to build a resilient version of the technology, as well as developer issues such as how to deploy code and bring the existing team up to speed on a new technology architecture.
Then there is how the technology interacts with the rest of the bank’s legacy systems. Jayasena said: “[Blockchain] is not going to stand alone, so how will it represent digital currency and real currency like sterling pound?”
Away from blockchain, the bank has already deployed emerging technology like MarkLogic’s NoSQL database, which allows companies to store unstructured data in a way that proprietary, relational databases cannot.
Jayasena explained: “The business problem basically was how we harmonise and standardise and expose data from markets and systems across disparate divisions. What we wanted was to get a cross-business, cross-regional view of data.
“We had to move from traditional ETL [Extract, Transform and Load] type modelling and relational data modelling to MarkLogic’s enterprise scale NoSQL capabilities. For example, we don’t know what the data is going to be used for, so we looked at a more flexible, schema on read approach.”