Building on the encryption and cryptography that allow assets to be exchanged securely and discretely the Blockchain is an evolutionary banking system. J. Bradley Hall explains why it is where the magic is.
One topic being discussed in boardrooms and cocktail parties around the world is digital currencies, with Bitcoin being replaced in the headlines by something called the Blockchain. Now, any conversation about digital currencies should start with the Blockchain and to help you get started, think of the Blockchain as a distributed ledger system where you can register, verify, trade and store the title to any asset or set of cash flows.
Bitcoin’s are exchanged on the Blockchain and over the last six years have acted like a proof of concept by validating that the ledger works. Candidly, Bitcoin’s act like a claim check with nothing to claim but the enthusiasm for what they may represent has resulted in a current price of US$250 and VC’s lining up to pour US$800 million into disruptive companies launching in the space. Some observers have dubbed the implications of the Blockchain as revolutionary but evolutionary might be more à propos, as the encryption and cryptography that allow assets to be exchanged securely and discretely have been perfected over the last 40 years.
In plain English, the Blockchain operates like a virtual vault, where you register the title to any asset and you are issued a claim check in the form of encrypted keys that only give you, the holder, access to what is registered. You can transfer the assets by presenting the encrypted key or keys as you can set up a requirement for 2 of 3, 4 of 7 etc that must be presented together to initiate a transfer.
This is a marked departure from the centralised ledger systems we currently utilize. If you think about the currency you carry around in your pocket, you are actually operating your own ledger. You manage your credits (let’s say USD$) and when you have excess currency, you go to your bank and deposit it onto their ledger. They acknowledge your credits (you are their creditor) and in turn they take excess credits accumulated on their ledger system and deposits them onto the Federal Reserves’ ledger. The Fed in turn takes excess credits and deposits them on the Bank for International Settlements (BIS) ledger in Basel, Switzerland in what is a hierarchical, centralised ledger system.
Alternatively, the Blockchain is decentralised and exists on hundreds of millions of computers around the world. It has been created with open source software and it is not owned by anyone. This is critically important for three key reasons, the first being that there is no single point of technology failure, as the distributed ledger acts like a global financial database that can’t be controlled or manipulated. Secondly, there is no single point of regulatory capture, meaning that governments can create choke points at the on and off ramps for fiat currencies that fall under their jurisdiction but they cannot confiscate the ledger or any asset titles registered on it. Finally, the titles to assets registered on the ledger can be viewed and verified by anyone, but the counter parties who may own or trade the assets, remain secure and discrete.
Are you still with me? If the answer is yes, then it follows that Digital Currencies are simply the encrypted keys or digital claim checks that allow you to transfer title to any asset or set of cash flows that are registered on the Blockchain. These transfers can take place in seconds and can be irrevocably verified using applied mathematics and state of the art encryption in about 600 seconds. The transactions are atomic and that simply means that they cannot be reversed. There are no chargebacks on the Blockchain.
Many of hundreds of digital currencies recently launched (like Bitcoin), share the fiat money trait of not having any intrinsic value and I believe it was Voltaire who famously observed “In the end, fiat money returns to its’ intrinsic value – zero.”
Increasingly, entrepreneurs with deep capital markets and banking experience are jumping on the Blockchain rocket ship which means that T+3 settlement for equity transactions and Swift wire transfers that go into the ether for days or weeks will be replaced with immediate transfers, settlement and clearing on the Blockchain.
One of the most exciting new offerings is AUREALS™, a digital currency denominated as a 1 gram weight and measure of gold. Under stealth development for the last 18 months, UHNW investors and Family Offices have been snapping up pre-order AUREALS™ at a pace that is on track to exceed several hundred million dollars in the first year alone.
Utilizing the worlds’ most trusted store of value for 6000 years allows holders to comfortably transfer any amount of currency, anywhere in the world, in seconds. Transactions are secure and discrete and importantly FATCA compliant. The AUREALS™ offer liquidity and can be exchanged for any currency or held as a gold denominated store of value, acting like a call on the underlying gold that never expires. The physical bullion is reserved on a 1:1 basis with AUREALS™ in non-bank vaults, in free zones around the world, which means under FATCA, it is exempt from declaration. The bullion is fully insured and is also regularly verified by the worlds largest certification company. AUREAL™ holders can also receive a no limit debit card to further enhance liquidity.
Maybe the Blockchain and Digital Currencies are revolutionary after all!
J. BRADLEY HALL is the architect behind the launch of a number of successful companies and enjoys a reputation as a focused, energetic entrepreneur with 28 years of finance, M&A, operational, gold trading and fund management experience. Brad is a thought leader who has deployed disruptive new business models that challenge out dated and often vulnerable incumbents across cultures and geographies including: the Americas, Brasil, Western/ Eastern Europe, the CIS and Asia.
Brad’s extensive experience includes various successful start ups and hedge funds with investments in digital currency and physical gold trading, as well as pre-IPO software fund and a pioneering automated software factory. He is currently the Founder, Chairman and
CEO of ICON Capital, which is launching a new digital currency based upon physical gold assets. Brad graduated from Seneca College in Toronto where he focused on International Business, Finance and Economics.