Crypto

Blockchain? A danger to the banking industry? – Christopher Rodriguez – Online memoir

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Cristobal

Rodriguez

DPUPHINE

UNIVERSITY OF PARIS

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Ethics clause

I certify on my honor that this writing is the result of personal work and that any direct or indirect reference to the work of third parties is expressly indicated. I remain solely responsible for the analyzes and opinions expressed in this document: Paris Dauphine University does not intend to give any approval or disapproval.

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Thanks

As a preamble to this writing, I would like to express my sincere thanks to the people who have supported me throughout this project.

In some way, you have contributed to the development of this university thesis, which completes two years of teaching.

I would like to especially thank Mr. Jacques Amar, who, as Director of the thesis, has always been available and kind to me.

Indeed, I could count on his help and his critical eye whenever I needed it, which was very gratifying.

My thanks also go to the professors at the University of Paris Dauphine, who passed on a bit of their knowledge with passion, professionalism and pedagogy.

Finally, I would like to express my gratitude to the Louis-Bachelier Institute and the French Banking Federation for allowing me to attend numerous round tables together with leading professionals in the sector.

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Index

Ethics clause 2

Acknowledgments 3

Introduction 5

I. General principles 8

A. What is the blockchain? 8

B. Building and operating a blockchain 10

C. Private blockchains 13

II. Towards a challenge to the banking model 15

A. The Trust Revolution 15

B. Uberization and economies, great challenges for financial markets 18

C. The response of the banks – birth of the R3 20 consortium

third party Blockchain and the Banking Industry, practical consequences 24

A. Summary of possible applications and work in progress 24

B. Regulation, ecology, management of new constraints 28

C. Personal data: the nerves of war 33

IV. Conclusion 38

V. Annexes 42

SAW. Enhancements (work in progress) 56

VIII. Conclusion 56

Appendix 57

A. QED 57

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We are in April 2016, I am in the first year of a Master’s Degree at the University of Paris Dauphine in association with Société Générale Securities Services, the Group’s post-trading entity. As I am about to return to my workstation, I am dragged by the entire team moving as one man into the huge conference room of the building.

I have no idea what it will be about, but judging from the enthusiasm of my colleagues, I imagine this is not just another conference on the application of new international or European regulations. .

It was when I entered the conference room that I discovered the reason for so much enthusiasm: “Business challenges: Blockchain, know everything about the revolution of tomorrow”

As passionate about innovation and new technologies, I try to follow the news of the digital world as much as possible, and that is why on many occasions I have seen this term appear in the news feed of Facebook, Twitter and even the LinkedIn apps that I use almost daily.

Curious in nature, I clicked on links that you are undoubtedly familiar with, namely: “Blockchain for Dummies”, “Understand Blockchain in 1 Minute” or “Surprise Your Friends Talking About Blockchain “.

The result of these self-training attempts was crystal clear, I still couldn’t say what a Blockchain was and couldn’t imagine how this technology could be revolutionary.

So I took a seat in the first row of the room, determined not to miss a minute of the speech from the Group’s Digital Director, who was accompanied by the innovation and development manager of the corporate part, but also by an expert in Blockchain. Vino presented a specific project.

In support, from IT managers in charge of Big Data to compliance and sales managers, questions arise.

Here again, no one is sure they understand what a blockchain is, how it works, what it looks like, but it is clear that each listener already imagines the multiple impacts that this technology could have on their activities. .

At the end of this conference, there was only one certainty, that was the subject of my thesis.

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From that moment on, I made the decision to start a watch on this coming revolution, the goal for me being first to collect as much general information as possible and then information related to applications directly linked to banking activities.

In my opinion, the more I progressed and the more things became clear in my mind, it was obvious that Blockchain was preparing to revolutionize the world of tomorrow and the banking industry at the same time.

How? Or what? This is what I will try to explain to you through this brief.

Together we will discover how a Blockchain works in general, then we will try to imagine the impact that this technology could have on the banking model and we will see how banks organize their response.

Finally, regarding the applications that are possible, we will discover the practical consequences of the use of Blockchain technology for banks.

Only once this work is finished can we imagine the answer to the question: “Blockchain, a danger to the banking industry?”

I. General principles

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A. What is the blockchain?

The objective of this first part is to present you in the simplest way possible what a blockchain is and how it works. For now, it is impossible for me to tell you about Blockchain1 without talking about Bitcoin, the two are intimately linked.

Let’s go back to the genesis of this technology.

It’s 2008, September 15 to be exact. Lehman Brothers, a heavyweight in the US banking industry, goes bankrupt, plunging the entire world into another crisis. This crisis is shaking the confidence of investors and citizens, in a single slogan: regulation.

The force of war? Money and trust.

In fact, at all times, whether it is primitive, fiat, or even scriptural money, financial transaction instruments are all based on trust. Trust that economic agents attribute to money as a unit of account, a medium of exchange and a store of value.

This trust is necessarily guaranteed by an institution that acts centrally. So it can be a Central Bank or a State.

What happens if economic agents no longer have confidence in these institutions?

On November 1, 2008, a man named Satoshi Nakamoto attempted to provide an alternative solution to this trust problem by publishing a manifesto entitled: “Bitcoin: A Peer-to-Peer Electronic Cash System” 2 through a distribution list for crypto. enthusiasts

In this post, the author offers a new 100% digital currency: Bitcoin.

1 Blockchain with a capital letter will mean that we are talking about technology in general, the same will be true for Bitcoin.

2 https://bitcoin.org/bitcoin.pdf

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This cryptocurrency would not depend on any centralized entity or institution, but would rely on a new information exchange protocol that would operate in a peer-to-peer mode, thus freeing itself from a central authority. This is the birth of Blockchain.

This protocol would function as an electronic registry distributed to all the computers on the network called: “nodes”.

In this register, all exchanges and / or transactions between the members of the network are marked with a time stamp and then notified to the other nodes, then the information is entered in a block and chained to the previous information blocks .

Thus, at any time, anyone can consult the history of the exchanges noted in the registry without having the possibility of deleting a block or making a modification.

At present, we still don’t know who is behind Satoshi Nakamoto’s name, is it an individual acting alone or a group of individuals? Does not matter.

We understand that in trying to find a solution to a given problem, the author of the manifesto draws the contours of a technology capable of providing answers to questions that have not yet been posed.

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