Skip to main content
Book cover

Banking Beyond Banks and Money pp 239–278Cite as

Understanding Modern Banking Ledgers Through Blockchain Technologies: Future of Transaction Processing and Smart Contracts on the Internet of Money

Part of the New Economic Windows book series (NEW)

Abstract

In this chapter we provide an overview of the concept of blockchain technology and its potential to disrupt the world of banking through facilitating global money remittance, smart contracts, automated banking ledgers and digital assets. In this regard, we first provide a brief overview of the core aspects of this technology, as well as the second-generation contract-based developments. From there we discuss key issues that must be considered in developing such ledger based technologies in a banking context.

Keywords

  • Blockchain
  • Smart contracts
  • Banking ledgers
  • Data integrity
  • Data security
  • Exchange clearing

This is a preview of subscription content, access via your institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • DOI: 10.1007/978-3-319-42448-4_13
  • Chapter length: 40 pages
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
eBook
USD   139.00
Price excludes VAT (USA)
  • ISBN: 978-3-319-42448-4
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
Softcover Book
USD   179.99
Price excludes VAT (USA)
Hardcover Book
USD   179.99
Price excludes VAT (USA)
Learn about institutional subscriptions
Fig. 1

Notes

  1. 1.

    Nakamoto (2008) introduced the first decentralised crypto-currency called Bitcoin, and related technology startups have already attracted more than $1 billion in funding. The currency has been the subject of academic considerations in topics such as privacy (Reid and Harrigan 2013), security Barber et al. (2012), regulation (Peters et al. 2014) and monetary policy (Peters et al. 2015).

  2. 2.

    In the Byzantine Generals' problem, introduced by Lamport et al. (1982), a group of Byzantine Generals are camped around an enemy city in different locations. If they all attack simultaneously, then they have superior firepower to their enemy. The problem is that they need to agree a common battle plan, so that they attack at the same time, with the additional complication that there may be a traitor amongst their ranks.

  3. 3.

    https://blog.ethereum.org/2015/08/07/on-public-and-private-blockchains/.

  4. 4.

    https://www.ethereum.org.

  5. 5.

    https://blog.ethereum.org/2015/08/07/on-public-and-private-blockchains/.

  6. 6.

    https://erisindustries.com/.

  7. 7.

    http://hyperledger.com/.

  8. 8.

    https://ripple.com/.

  9. 9.

    https://erisindustries.com/components/erislegal/.

  10. 10.

    http://www.commonaccord.org/.

  11. 11.

    http://p2pfoundation.net/Legal_Framework_For_Crypto-Ledger_Transactions.

  12. 12.

    http://www.multichain.com/blog/2015/07/bitcoin-vs-blockchain-debate/.

  13. 13.

    Factom whitepaper, available at https://raw.githubusercontent.com/FactomProject/FactomDocs/master/Factom_Whitepaper.pdf.

  14. 14.

    http://cryptoassetscore.readthedocs.org/en/latest/integrity.html.

  15. 15.

    Cryptotechnologies, a major IT innovation and catalyst for change, available at https://www.abe-eba.eu/downloads/knowledge-and-research/EBA_20150511_EBA_Cryptotechnologies_a_major_IT_innovation_v1_0.pdf.

  16. 16.

    Note: the technical note is not representing the direct views of the IMF.

  17. 17.

    https://consensys.net/ventures/spokes/.

  18. 18.

    http://www.ifrs.org/current-projects/iasb-projects/financial-instruments-a-replacement-of-ias-39-financial-instruments-recognitio/Pages/Financial-Instruments-Replacement-of-IAS-39.aspx.

  19. 19.

    http://www.ifrs.org/current-projects/iasb-projects/financial-instruments-a-replacement-of-ias-39-financial-instruments-recognitio/documents/ifrs-9-project-summary-july-2014.pdf.

  20. 20.

    Source: Risk management issues in central counterparty series, presentation by Priyanka Malhotra at the Systemic Risk Centre at LSE.

  21. 21.

    For an example of EU regulation in this area, see http://www.fca.org.uk/firms/being-regulated/meeting-your-obligations/firm-guides/emir.

  22. 22.

    BCG, Shortening the Settlement Cycle October 2012, available at http://www.dtcc.com/media/Files/Downloads/WhitePapers/CBA_BCG_Shortening_the_Settlement_Cycle_October2012.pdf.

  23. 23.

    https://www.fanniemae.com/content/fact_sheet/dvp-dvf-comparison.pdf.

  24. 24.

    http://r3cev.com.

  25. 25.

    http://digitalasset.com.

  26. 26.

    http://symbiont.io.

  27. 27.

    http://chain.com.

  28. 28.

    http://setl.io.

  29. 29.

    www.hitfin.com.

References

  • Barber, S., Boyen, X., Shi, E., Uzun, E.: Bitter to betterhow to make bitcoin a better currency. Financial Cryptography and Data Security, pp. 399–414. Springer (2012)

    Google Scholar 

  • Bell, D.E., LaPadula, L.J.: Secure computer systems: mathematical foundations. Technical report. DTIC Document (1973)

    Google Scholar 

  • Benkler, Y.: The Wealth of Networks: how Social Production Transforms Markets and Freedom. Yale University Press (2006)

    Google Scholar 

  • Biba, K.J.: Integrity considerations for secure computer systems. Technical report. DTIC Document (1977)

    Google Scholar 

  • Bliss, R.R., Steigerwald, R.S.: Derivatives clearing and settlement: A comparison of central counterparties and alternative structures. Econ. Perspect. 30(4) (2006)

    Google Scholar 

  • Buterin, V.: Multisig: The Future of Bitcoin (2014a)

    Google Scholar 

  • Buterin, V.: A next-generation smart contract and decentralized application platform. White Paper (2014b)

    Google Scholar 

  • Carter, J.L., Wegman, M.N.: Universal classes of hash functions. In: Proceedings of the ninth annual ACM symposium on Theory of computing, pp. 106–112. ACM (1977)

    Google Scholar 

  • Clark, D.D., Wilson, D.R.: A comparison of commercial and military computer security policies. In: 1987 IEEE Symposium on. IEEE Security and Privacy, pp. 184–184 (1987)

    Google Scholar 

  • Czepluch, J.S., Lollike, N.Z., Malone, S.O.: The Use of Block Chain Technology in Di_erent Application Domains (2015)

    Google Scholar 

  • Denning, Dorothy E.: A lattice model of secure information ow. Commun. ACM 19(5), 236–243 (1976)

    MathSciNet  CrossRef  MATH  Google Scholar 

  • Devanbu, P., Gertz, M., Martel, C., Stubblebine, S.G.: Authentic third-party data publication. In: Data and Application Security, pp. 101–112. Springer (2001)

    Google Scholar 

  • Douceur, J.R.: The sybil attack. In: Peer-to-peer Systems, pp. 251–260. Springer (2002)

    Google Scholar 

  • Duffe, D., Zhu, H.: Does a central clearing counterparty reduce counterparty risk? Review of Asset Pricing Studies, 1(1), 74–95 (2011)

    Google Scholar 

  • Elmasri, R., Navathe, S.B.: Fundamentals of Database Systems. Pearson (2014)

    Google Scholar 

  • Franco, P.: Understanding Bitcoin: Cryptography, Engineering and Economics. Wiley (2014)

    Google Scholar 

  • Ge, X., Polack, F., Laleau, R.: Secure databases: an analysis of Clark-Wilson model in a database environment. In: Advanced Information Systems Engineering, pp. 234–247. Springer (2004)

    Google Scholar 

  • Halevi, S., Harnik, D., Pinkas, B, Shulman-Peleg, A.: Proofs of owner- ship in remote storage systems. In: Proceedings of the 18th ACM conference on Computer and communications security, pp. 491–500. ACM (2011)

    Google Scholar 

  • Kosba, A., Miller, A., Shi, E., Wen, Z., Papamanthou, C.: Hawk: The blockchain model of cryptography and privacy-preserving smart contracts. Technical report. Cryptology ePrint Archive, Report 2015/675, 2015 (2015). http://eprint.iacr.org

  • Lamport, Leslie, Shostak, Robert, Pease, Marshall: The Byzantine generals problem. ACM Trans. Program. Lang. Syst. (TOPLAS) 4(3), 382–401 (1982)

    CrossRef  MATH  Google Scholar 

  • Merkle, R.C.: Protocols for public key cryptosystems. In: Null, pp. 122. IEEE (1980)

    Google Scholar 

  • Merkle, R.C.: Secrecy, Authentication, and Public Key Systems (1979)

    Google Scholar 

  • Nakamoto, S.: Bitcoin: A Peer-to-Peer Electronic Cash System (2008)

    Google Scholar 

  • Pessoa, M., Williams, M.J.: Government cash management: relationship between the treasury and the Central Bank. Int. Monetary Fund (2013)

    Google Scholar 

  • Peters, G.W., Panayi, E., Chapelle, A.: Trends in crypto-currencies and blockchain technologies: A monetary theory and regulation perspective (2015). arXiv preprint arXiv:1508.04364

  • Peters, G.W., Chapelle, A., Panayi, E.: Opening discussion on banking sector risk exposures and vulnerabilities from virtual currencies: an operational risk perspective. Available at SSRN 2491991

    Google Scholar 

  • Redmond, E., Wilson, J.R.: Seven databases in seven weeks: a guide to modern databases and the NoSQL movement. Pragmatic Bookshelf (2012)

    Google Scholar 

  • Reid, F., Harrigan, M.: An Analysis of Anonymity in the Bitcoin System. Springer (2013)

    Google Scholar 

  • Rosenfeld, M.: Overview of colored coins. White paper, bitcoil.co.il (2013)

    Google Scholar 

  • Sandhu, Ravi S.: Lattice-based access control models. Computer 26(11), 9–19 (1993)

    CrossRef  Google Scholar 

  • Swan, M.: Blockchain: Blueprint for a New Economy. O’Reilly Media, Inc. (2015)

    Google Scholar 

  • Swanson, T.: (2015) Consensus-as-a-service: a brief report on the emergence of permissioned, distributed ledger systems

    Google Scholar 

  • Szabo, Nick: Formalizing and securing relationships on public networks. First Monday 2(9), 31 (1997)

    CrossRef  Google Scholar 

  • Tripunitara, Mahesh V., Li, Ninghui: The foundational work of Harrison-Ruzzo-Ullman revisited. IEEE Trans. Dependable Secure Comput. 10(1), 28–39 (2013)

    CrossRef  Google Scholar 

  • Wood, G.: Ethereum: a secure decentralised generalised transaction ledger (2014)

    Google Scholar 

  • Yaker, I.F., Pattanayak, S.: . Treasury Single Account: an essential tool for government cash management. Int. Monetary Fund (2012)

    Google Scholar 

  • Zyskind, G., Nathan, O.z., Pentland, A.: Enigma: Decentralized Computation Platform with Guaranteed Privacy (2015). arXiv preprint arXiv:1506.03471

Download references

Author information

Authors and Affiliations

  1. Department of Statistical Science, University College London, London, UK

    Gareth W. Peters

  2. Department of Statistical Science, Oxford Mann Institute, Oxford University, Oxford, UK

    Gareth W. Peters

  3. Systemic Risk Center, London School of Economics, London, UK

    Gareth W. Peters & Efstathios Panayi

  4. Department of Computer Science, UCL, London, UK

    Efstathios Panayi

Authors
  1. Gareth W. Peters
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Efstathios Panayi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Gareth W. Peters .

Editor information

Editors and Affiliations

  1. UCL, Center for Blockchain Tecnologies, London, United Kingdom

    Paolo Tasca

  2. UCL Computer Science, London, United Kingdom

    Tomaso Aste

  3. SAFE-Goethe University Frankfurt, Frankfurt am Main, Germany

    Loriana Pelizzon

  4. ETH Zurich & ECUREX Research, Zurich, Switzerland

    Nicolas Perony

Rights and permissions

Reprints and Permissions

Copyright information

© 2016 Springer International Publishing Switzerland

About this chapter

Cite this chapter

Peters, G.W., Panayi, E. (2016). Understanding Modern Banking Ledgers Through Blockchain Technologies: Future of Transaction Processing and Smart Contracts on the Internet of Money. In: Tasca, P., Aste, T., Pelizzon, L., Perony, N. (eds) Banking Beyond Banks and Money. New Economic Windows. Springer, Cham. https://doi.org/10.1007/978-3-319-42448-4_13

Download citation