While the world is ever more fixated on the price of Bitcoin and Ethercoin and the potential for the current swarm of initial coin offerings (ICOs), other startups are busying themselves on applications for the blockchain underlying technology that are arguably more profound. So to BlockEx, a blockchain/distributed ledger technology (DLT)-enabled financial trading exchange that comes with the potential to be connected to the wider institutional investment and financial trading markets. In early September, the company announced it was open for business, a little over a year from when BlockEx it was officially formed. What is particularly interesting about BlockEx is that it is another participant in the UK Financial Conduct Authority’s (FCA) regulatory sandbox, an experience which founder Adam Leonard says has been “very helpful”. GamCrowd caught up with Leonard to talk about what lessons can be learnt from his own company’s success in transforming a blockchain idea into reality.
GamCrowd: Can you explain the thinking behind BlockEx Markets and talk a bit about how blockchain makes the product possible?
Adam Leonard: The exchange is high-frequency trading (HFT) capable with institutional connectivity via API FIX and ITCH protocols and is digital asset framework (Blockchain/DLT) agnostic. Currently BlockEx is building out product extensions to include licensable management tools (securities, trade order, origination and deal flow) as well as and regulatory reporting for any asset originated on the platform. Any product BlockEx builds either leaves behind a tradable asset or creates distribution and deal flow. A digital asset is any financial product built using blockchain or DLT. This may include but is not limited to bonds, equities, ETFs, syndicated loans, trade and supply-chain finance, insurance etc.
GamCrowd: How do you think blockchain can transform aspects of the financial markets? How disruptive will it be?
Adam Leonard: Blockchain has the ability to disrupt the market in several different ways. It will give traders access to a 24/7 marketplace and also provides access to reliable data on a global level meaning that risk mitigation can be simplified. Blockchain also gives a new level of trust to traders, information quality and price transparency as well as trusted counterparties. The area where blockchain has the potential to be most disruptive is in efficiency; blockchain can help to provide near instant settlement, up to 70% reduction in costs and up to 80 percent reduction in time to market.
GamCrowd: What are the hurdles that will have to be overcome for BlockEx and the technology?
Adam Leonard: The hurdles that BlockEx and blockchain technology face are the acceptance on a wider scale. The current market is widely accepted and changing things can take a long time if people are not properly educated on the advantages of blockchain. This is why we have been working with several partners to help people understand why blockchain is not a threat to people’s jobs but the logical step for the market to evolve.
GamCrowd: How far away are we from blockchain being able to fulfil the promises made on its behalf? Is your technology immediately scalable? (I'm thinking here of the well-publicised issues around transaction speeds and whether there is a correlation with other DLTs)?
Adam Leonard: We are there now. The issues with transaction speeds and the ability of the technology to scale largely have impacted public blockchain systems rather than private enterprise systems that we have been using to build client solutions. That being said progress is being made on the scalability of public blockchains both in regards to Bitcoin and Ethereum and new technology is being created all the time which is infinitely scalable, like EOS and IOTA. With all this in mind I believe we will be able to build enterprise class applications on public blockchains during 2018.
GamCrowd: How have you found the FCA regulatory sandbox experience so far? How has it helped with regard to developing the product?
Adam Leonard: The FCA sandbox process has been thorough and focused with regular meetings and discussions relating to new concepts and ideas. Naturally their key focus is to ensure proper conduct within the markets and also cover specific risks which relate to the nature of our platform and the context of the market we intend to operate in. The FCA have been very helpful and the ability to float ideas has helped the development in relation to customer and risk approaches. The sandbox has also developed for us more into a joint venture in terms of collaboration and engagement which has ensured an open dialogue.