The ability to offer ‘provable market data’ had previously been costly, impossible or extremely difficult. A new partnership between two Australasian companies has resulted in a process they are calling “Market-Chaining,” where financial data such as market indexes, quotes and trades will be secured on the Blockchain, providing immutable receipts.
“Blockchain technology represents a fundamental shift in how we look at value and trust. By securing Market-Data on the Blockchain, we delete trust from many equations.”
— – Fran Strajnar, Brave New Coin CEO
The first data stream to be offered in this format will be from BNC’s very own data division. The Bitcoin Liquid Index (BNC-BLX) is a comprehensive historic and live bitcoin index, purpose built for the settlement of bitcoin derivatives. As financial service operators use blockchain technology for exciting new solutions like ‘proof of reserves,’ market appetite is also growing for ‘proof of settlement,’ which is one of the verification and auditing implications of Market-Chaining.
BNC was founded in 2013 by a trio of experts with experience in Big Data and system architecture. While most readers are aware of the news division, BNC is a privately-held data and research company, with staff in New Zealand, Australia & NYC. The company offers Market Data, Research, and Solutions for the financial services sector.
This brand new solution is the result of a partnership with Australian based Smartbit. Founded in 2013 by Jarred Spriggs and Charles Wakefield, Smartbit provides an explorer and search engine for the blockchain. Aside from collaborating with BNC, Smartbit provides search results, charts, graphs, and other quick access to bitcoin blockchain data, with an intuitive search process and filtering tools.
“Brave New Coin is a leader in Market Data, and Smartbit is a leader in Blockchain data. The partnership has many synergies, and ultimately extends Bitcoin and the blockchain to more end users.”
— – Jarred Spriggs Smartbit Co-Founder
Brave New Coin had been searching for innovative developers who understand their vision of “creating resources and tools that will reshape the global financial framework,” Strajnar stated. “When we discovered Smartbit, we found a team with high expertise and integrity; A team dedicated to the same vision as BNC. Smartbit is a next-generation BlockExplorer. In fact, after checking out what they actually do behind the scenes, we realised it’s not block-exploration at all, it’s actually a proper blockchain search engine. We needed a search engine that could build the future with us.”
In a recent update, Spriggs explained that “using existing data storage technologies, we can tie any number of data points in a provable and predictable fashion to the blockchain. Doing this gives new and existing applications the security and immutability of the blockchain, without having to create new tokens or competing chains.”
“Tying application specific data to immutable transactions will have some profound implications to groups and individuals we didn’t know was possible before.”
— – Spriggs
According to BNC CEO Fran Strajnar, Market-Chaining will explore several potential benefits. If an asset is registered by an index provider on the blockchain, depending on the configuration, either anybody or permissioned parties can verify that third parties brokering, selling or facilitating financial products settling against the index are acting legitimately. This may have vast implications for auditing trade and settlement, such as offering a verification layer tying together index feeds and brokerage quote, trade and settlement systems.
“The biggest benefit of embedding the BLX or any Index, along with the biggest benefits of Bitcoin is transparency, immutability and security. Finance data and prices affect everything we do, from buying groceries to paying for fuel. These prices are driven by commodity indexes and it’s extremely important that we have provable historic data to ensure even simple things like paying for fuel is fair.”
— – Spriggs
Securing the BNC-BLX on the Blockchain
BNC’s BLX consists of nearly 2 million data points, which build a historic picture of bitcoin’s market activity since trading began on MtGox in 2010. One of the outputs from the BLX is a live data feed that is updated every 30 seconds. BLX’s transition onto the blockchain, it’s genesis, can be viewed on Smart-Bit’s Block-Explorer.
Each one of these historic data points was hashed individually on the Blockchain using a Merkle Tree. This was done to create a proof for each data point, without spamming the blockchain with ~2 million transactions. Combined with a data-store, this allows for the storage of vast quantities of data. Financial service providers can prove quote, trade and settlement accuracy, without having to disclose sensitive details. The bitcoin industry has had it’s fair share of scams. Having a bitcoin index secured on the blockchain means exchange operators now have a ‘Proof of Settlement’ option for settling their derivative products.
“People trust mathematics a lot more than they trust people.”
— – Strajnar
BNC is already in talks, with several conventional Stock Exchanges and Index providers, about trialing this new solution. “Imagine the S&P 500 ‘Secured on the Blockchain’. Any person, system or machine, reliant on this market information, would now have a trustless verification layer,” Strajnar posits.
The largest benefit to institutions may well be the ability to shed trust completely. According to Strajnar, “if an asset is registered by an index provider on the blockchain, anybody can verify that 3rd parties using the index data for settlement are acting legitimately. There’s also vast implications for auditing and compliance. By tying in an index feed to exchange and broker, trade and settlement processes, public records are created and easily verified.”
Broker quote & trade verification solution
While large financial powerhouses, which offer their own benchmark indexes, stand to benefit from Market-Chaining the most, it’s an open service, available to anyone. “We can secure any market data feed on the Blockchain,” Strajnar explained. “In a way that does not threaten proprietary intellectual property, break existing revenue models or open up market participants to market manipulation.”
The target market could not be any larger. Every day, trillions of dollars worth of financial transactions are made across exchanges worldwide, for a broad range of instruments including securities, currencies, commodities and derivatives.
“Any of the world’s indexes, end-of-day price feeds etc can use our solution to create an immutable verification layer without the need to overhaul existing systems or dramatically change existing work-flow.”
— – Strajnar
This process can be easily replicated for any type of asset class, with any type of financial data attached to it. This includes both “old-world” index, quote or trade data and the new Digital Currencies or Blockchain Backed Equities. If one can assume that the end game of embracing blockchain technology is to usher in a new era of transparency in the global financial system, this could be an interesting step in the right direction.
More shared projects are already on the drawing board.“This partnership has re-enforced BNC’s position in the industry and strengthened the company’s service offering,” Strajnar added.
“BNC will be expanding the range of developer tools that we are planning to bring to the market. This first project is the beginning of a larger project, bringing financial and blockchain data together, in an accurate and transparent way.”
— – Strajnar
Every day, trillions of dollars worth of settlements are calculated against leading indexes across exchanges worldwide, for a broad range of instruments including securities, currencies, commodities and derivatives.
While the world heads towards a point where every financial outlet can offer the type of transparency proposed by ‘Market-Chaining’, disruptions are bound to occur. “If exchange and index operators ‘get’ the implications of this, the first to be disrupted is the many various clunky legacy infrastructure providers,” Strajnar Stated emphatically. “There’s a kaleidoscope of enterprise solution providers which offer notarization and verification services that are now largely defunct with the advent of the Blockchain”
Spriggs agrees that disruption is imminent, now that the first Index to be secured on the Blockchain is available it’s very likely to accelerate the process.“I fully expect financial institutions to be using provable market data solutions very early into the new year.”
For more information please reach out to [email protected]