Banca IMI Bank Explores Ethereum Derivatives

By in Finance on November 22, 2017
  • A subsidiary of global banking giant Intesa Sanpaolo is taking steps to reimagine what the $1.2 quadrillion derivatives market might one day look like on a public blockchain.
  • Instead of risking delays and relying on courts to resolve possible disputes, Morini said the team’s derivatives workflow builds the terms of resolution into the smart contract itself.
  • The project, which is only in its earliest stages, is designed to ease concerns about privacy by only interacting with the public blockchain when a derivative terminates.

Pete Rizzo writes (key points selected):

A subsidiary of global banking giant Intesa Sanpaolo is taking steps to reimagine what the $1.2 quadrillion derivatives market might one day look like on a public blockchain.

In a new white paper released today, Banca IMI details how an ethereum smart contract built by Intesa Innovation, Banca IMI and blockchain startup Oraclize makes it impossible for any counterparty to default by anticipating eventualities that might otherwise result from a legal dispute.

But in an exclusive interview with CoinDesk Morini also shed light on two other projects currently underway that he hopes could help inspire entirely new derivatives models using bitcoin and ethereum.

According to Morini, though, a smart contract executed on the ethereum blockchain could make this a problem of the past.

Instead of risking delays and relying on courts to resolve possible disputes, Morini said the team’s derivatives workflow builds the terms of resolution into the smart contract itself.

One project employs a network of state channels designed to let counterparties send messages related to a derivative to each other off of the blockchain.

The project, which is only in its earliest stages, is designed to ease concerns about privacy by only interacting with the public blockchain when a derivative terminates.

A third project — also being built with Intesa Sanpaolo, Banca IMI and Oraclize — aims to give users the highest levels of privacy by building private blockchains into a central counterparty clearing house (CCP) for trading derivatives.

But while Morini appears convinced of the superiority of public blockchains to service the derivatives market, he concedes one fundamental obstacle which has yet to be fully overcome: privacy.

To meet that demand, derivatives startups like LedgerX are already conducting increasingly complicated contracts using bitcoin, and the DTCC is using a private blockchain developed by Axoni to move its own derivatives to a blockchain.

Read the full article: https://www.coindesk.com/italian-bank-intesa-sanpaolo-exploring-ethereum-derivatives/

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