There are unnecessarily difficult steps required for a citizen to transact on a financial service. For example, to invest in the stock market, we must currently open an account with a stockbroker, prove our identity by sending scans of documents, deposit money, and only then access liquidity.
We believe that a citizen will be able to arrive on the app of a financial service such as an investing app and to transact in one step, by signing in with their blockchain wallet. Their identity and currency will be stored on their blockchain account. We believe that this will happen within the next 10 years.
This has profound implications:
- Social mobility
Rich people get richer partly because they have access to financial services that poorer people do not. This closes that gap.
- Innovation in financial services
By reducing the unnecessary bureaucracy of creating a financial service and engaging with customers, we break down the barriers that have allowed incumbent financial services to keep market share without improving the experience of their users.
- Replacement of custodial, registry, escrow and settlement services.
Custody is replaced by ‘tokenising’ assets, for example you can make a token on the blockchain that denotes the ownership of equity in a company, instead of a share certificate. The blockchain can be programmed so that a ‘smart contract’ (an account that is run by an algorithm instead of a person) can escrow tokens. Settlement of transactions is automated into the blockchain.
How do we get there?
The following must be in place in order to provide perfect access to financial services for all citizens:
- Good User Experience
This includes account management, latency and throughput of transactions and security and privacy.
- Currency Swap
The distribution of currency on the blockchain should be initialised by trading in current currencies (£/$…) for the new tokens.
- Identity on the Blockchain
Owning the key to a blockchain account should be sufficient to prove your identity as well as other information about you, for example, your age.
- Legal Finality
For example if the blockchain says that you own a property, then you legally do own it.
- Regulatory framework
We have regulatory oversight for good reasons, such as reducing fraud or financing of terrorism. This regulation will need to adapt to blockchain systems.
- Easy Blockchain Development Tools
A simple way to build finance applications around a user’s blockchain wallet
What is Blockchain?
A blockchain is a way of collectively recording a ledger in a peer-to-peer network that has benefits over centralised ledgers in certain situations. It also involves governance for how the ledger is run.
- A ledger is a list of transactions. You use them and benefit from them in your everyday life. For example, your bank account is a ledger that represents transactions coming in and out
- A centralised ledger is one that is recorded by a trusted entity. For example, we trust banks to record transactions on behalf of our society
- Governance is a way of collectively deciding something. For example, in the United Kingdom we use ballot voting for our general election, as part of a representative democracy
Blockchain is a decentralised ledger because an algorithm is used to collectively reach a consensus on which transactions are added. It is ‘trustless’ because we do not have to trust the reporting of any one entity. Instead we trust in a system for collectively reporting on the ledger.
Incentive helps your users to skip the exchange and buy blockchain tokens directly. Find out more on our website.
Thanks to Paul Berg and Melissa Yacoub for editing.