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The Promises and Pitfalls of Blockchain

Antoine Shagoury | State Street Corporation

December 13,2016

In theory, blockchain could make back office settlement and clearing nearly instantaneous. But for all the value that blockchain brings to the financial services industry, it's far from perfect.

Blockchain is having an identity crisis.

Thought of primarily as the technology underlying bitcoin, blockchain has been easy to dismiss as nothing more than an enabler for the currency of hackers and the economy of the dark web.

Dig a little deeper and those who really get to know blockchain quickly see it has the potential to be one of those break-out catalysts, driving revolution or instigating evolutionary technology shifts into areas that will impact our personal and professional lives.

Companies around the world are facing ongoing cyber-security concerns and data management challenges. Custodians have the additional pressure to keep up with the speed of markets by automating processes and finding efficiencies at every step of the trade.

Distributed ledger technology (DLT) or blockchain inspired technologies have the potential to allow just that. Providing a distributed store of information that can be automated, DLT could enable companies to make and verify transactions on a network instantaneously without a central authority. That means reducing the role of intermediaries in the system and improving transaction speed all while providing an inherent security.

We're excited about future blockchain inspired opportunities and the changes it could bring.

Essentially, blockchain is a distributed database made up of "blocks" holding batches of transactions. The blocks, timestamped and secured from tampering, are linked together to form a chain. The blockchain becomes a digital ledger of transactions shared across a network of computers.

Blockchain can be open and public by design, or permissions-based and private for enterprise uses. And because blockchain solutions are being built with security in mind, cryptography is a vital element of the technology, keeping the data in the blocks safe.

In theory, back office settlement and clearing should become nearly instantaneous. Blockchain could also enable more processes to be automated, saving time and effort that can be redirected elsewhere. It could enable a defined group of counterparties to view and maintain a single ledger of all the transactions between them, minimizing operational risk and improving transparency and efficiency.

While we see considerable opportunity in DLT, we recognize that the technology remains in its early stages and certainly that can bring challenges. Regulatory, governance and control issues associated with blockchain’s use must evolve. There’s also work to be done to coordinate standard ways of using blockchain technology, so different institutions are all operating within the same framework.

As with any new technology that has potential value for our industry, our company, and our clients, we’re excited about future blockchain inspired opportunities and the changes it could bring. To fully explore those possibilities, we are actively engaged in evaluation, prototyping and piloting solutions with other banks, our blockchain consortium partners and industry working group participation.

We will strive to play a key part in realizing blockchain’s DLT potential – and perhaps help establish new innovative technology business opportunities.

Topics: Blockchain , Advanced Technology


Antoine Shagoury | State Street Corporation

Antoine Shagoury is our global chief information officer. He manages our information technology and enterprise data activities, directly supporting operations in 27 countries. Antoine is listening for the harmony between client experience and user experience.