First Blockchain Backed Index comes online
This is a guest post by: Luke Parker
In a first-of-its-kind, new partnership records market-data on the Blockchain. By securing any market feed onto the bitcoin blockchain, Brave New Coin and Smartbit hope to revolutionize markets in several important ways.
Today Brave New Coin (BNC) and Smartbit http://www.smartbit.com.au officially announce their partnership and the securing of the world’s first Price-Index on the Blockchain.
The ability to offer ‘provable market data’ has previously been impossible or extremely difficult.
The partnership will be the first to engage in ‘Market-Chaining,’ the process where financial data such as market indexes, quotes and trades will be secured onto the Blockchain, providing immutable receipts.
The ability to offer ‘provable market data,’ or immutable and trustless market records is now a reality and it creates exciting new opportunities to reshape the legacy global financial framework.
“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
Bitcoin, the digital currency, is the first ‘App’ that came with the invention of the Blockchain. The first data stream to be offered in this format will be BNC’s Bitcoin Liquid Index, the BNC-BLX, a comprehensive historic & live bitcoin index, purpose built for settlement of bitcoin derivatives. As financial services operators use blockchain technology for exciting new solutions like ‘proof of reserves’, the market appetite is also growing to see blockchain technology rolled out for ‘proof of settlement’, which is one of the verification and auditing implications of Market-Chaining.
“Tying application specific data to immutable transactions will have some profound implications to groups and individuals we didn’t know was possible before. 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.” – Jarred Spriggs, Smartbit co-founder
Market-Chaining has several 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 an index are acting legitimately. This has vast implications for auditing trade and settlement, such as offering a verification layer between them by tying together index feeds for broker 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
BNC’s BLX consists of nearly 2 million data points, which build a historic picture of bitcoin’s market activity since trading began of trading on MtGox in 2010. BLX’s transition onto the blockchain, it’s genesis, can be viewed on Smart-Bit’s Block-Explorer here.
Above: Securing an price index on the blockchain
Merkle Root embedded in this transaction: 4df31110dd5a5d7f06eeef3ba1bba5afcb9e604b5f35ffef39d580c70a629d5b
One of the outputs from the BNC-BLX is an indexed price feed (tick) every 30 seconds. Each one of these nearly 2 million historic data points was hashed individually on the Blockchain using a Merkle Tree. This was done to create a proof of each data point without spamming the blockchain with 1 transaction per record.
Combined with a data-store, this allows us to create a record of millions of transaction, the ability for financial services to prove quotes, trades and settlements, without having to disclose sensitive details unless parties have access to the data store to access the raw data.
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
Already, BNC is in talks with several conventional Stock Exchanges & Index providers about trialing this new technology. As the word spreads of its new benefits and functionality, BNC hopes to offer this service to all of the world’s financial institutions, spurring a much needed trend to offer greater Security, transparency and interoperability to the world of high finance.
“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
The largest benefit to institutions is 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 & compliance. By tying in an index feed to exchange & broker trade and settlement processes, public records are created and easily verified.”
Strajnar further adding that, the large financial powerhouses which offer their own benchmark indexes stand to benefit from Market-Chaining the most. However, it’s an open service, available to anyone.
“We can secure any market data feed on the Blockchain in a way that does not threaten proprietary intellectual property, break existing revenue models or open up market participants to market manipulation.” – Strajnar
Left: Broker quote verification solution
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 changing 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. That included both old-world index, quote or trade data and the new Digital Currencies or Blockchain Backed Equities of any type.
If one can assume the end game of embracing blockchain technology is to usher in a new era of transparency in the global financial system, this is the first step in doing so, according to Strajnar.
The partnership between BNC and Smartbit is a perfect fit. 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.
“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.” – Strajnar
Founded in 2013 by Jarred Spriggs and Charles Wakefield, Smartbit https://www.smartbit.com.au is a Melbourne, Australia-based block explorer and search engine http://bravenewcoin.com/news/smartbit-attempts-the-most-in-depth-bitcoin-search-engine/ for the blockchain. Other than collaborating with BNC on Index-Chaining financial data, Smartbit provides search results, charts, graphs, and other quick access to bitcoin blockchain data with an intuitive search process and filtering tools.
Meanwhile, BNC was founded in 2013, based in Queenstown, New Zealand, as a privately-held data and research company focused on the exponential Blockchain and Digital Equities industry. The company offers Market Data, Research & Solutions for the financial services sector to get the best out of Blockchain Technology.
“Brave New Coin leaders 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.” – Spriggs
It is rare when two companies’ vision and skillset fit together so perfectly. 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. 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
While the world heads towards a point where every financial outlet can offer ‘Market-Chaining’ solutions like the BNC-BLX, 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. 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” – Strajnar
Spriggs concurs with Strajnar 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.” –Spriggs