Faster, Better, Cheaper - Decoding the Impact of Blockchain

[Music] before we jump into blockchain and financial markets um I'd like to read out a message first for you that was not the message that was sent to me it was a distress signal call come here as quickly as possible old man now that was a wireless Telegraph that was sent from Titanic to Paia which was a ship that came to rescue um people from Unthinkable ship not long before that New York Times have labeled Wireless telegram technology as superficial sudden and too fast for the truth too fast for the truth well on that night it was not only not too fast for the TRU for the 700 people that survived but also unfortunately it was a bit too slow for, 1500 people that didn't I like to tell the stories because important to me to leave you with something after this presentation and if there is anything that would be that blockchain will inevitably be the single and the most important source of Truth for financial markets now blockchain has its fair share of criticism as you are all aware especially in the last couple of years but in reality so did internet GPS and nuclear now internet has become such an important part of our lives that many consider this to be a human right and without GPS we would be still navigating using red books called Michelin guides now without going into too many details I would summarize that blockchain is actually something that is very very familiar to you today it's simply a next iteration of a database much more Superior than what we had before a napkin a SQL database n EXL or Google Sheets where you all collaborate today blockchain adds immutability to the records and the records that you can also verify so it's just better version of what we had already before now due to the fact that the records now can be transported blockchain also allows you to implement rules and force the rules on the transparent information let me explain further the largest collapses in recent history has shown shown us how important good quality information is if information was true those collapses were preventable and as a matter of fact accounting has been if not the main problem then one of the main problems of why those collapses have occurred in the first place because you can manipulate Excel sheets all day long but you can't do the same with blockchain overarchingly we can conclude that bad information just have devastating effects on society and the most recent example has proven how detrimental those effects could be where we have cases between archus and credit Wiss with over leverage but more importantly the other side did not have a full picture and no one had a full picture so we can see as as how one episode can bring down to its knes institutions which are 100 200 years old transparent information and on blockchain is not just going to be a good friend for The Regulators it will be a necessity Regulators are not fortune tellers so they don't have a choice but to be reactive and from the slide you can see it takes on average four years for the regulations to be implemented now at that point in time the damage is already done and there is another crisis brewing in the background and no one knows where I want to bring us to uh a little bit of a different industry and show what other things have come what happens in Aerospace so as you can see here there are a number of flights departures and the Fatal exitance per million of flights in 1970 fly by wire systems got introduced by moving manual operations in aircrafts onto the electronics and at that time reliability of electronic systems were also severely questioned now today we don't have live reconciliation of data in financial markets so autopilot is simply not possible but we do need an autopilot and blockchain can definitely help with that now why Aerospace had to implement this because there are human lives at stake I would argue there are more human lives at stake when it comes to financial markets and well-being of people and their families it just never makes the headlines so let's now after we've talked about all the deps and Titanic talk about blockchain there is a myth in blockchain side that it's really blockchain is not fast enough there are different blockchains competing as to what's the fastest way to buy a coffee it seems like a lot of people are really obsessed in in in blockchain space around purchasing a coffee which I generally don't understand there is A9 trillion in FX overhang every day that means that that's something that sits there without any PVP protection and if the system glitches or there are world events unfold that's the value at risk essentially and those are the average speeds today on blockchain now I would argue that 3 minutes is okay if not one second not 10 minutes you can pick and choose we have that technology today so we need to focus on implementing it rather than figuring out how to pay for coffee faster let's argue for a second that markets are efficient and let's look at the financial markets today most of you if not from your day jobs but maybe from the movie Big Short know what cdos are hopefully by this point that was instrument that's largely responsible for bringing down to his KN um Financial ecosystem and resulted in global financial crisis in 2008 now there is also collateralized loan obligations which granted they have better risk profile right those are commercial loans derivatives essentially and in finance we generally love to package things and that people don't understand and essentially see what happens now IMF estimates the losses from cdos during the GFC were somewhere between 230 billion to 300 billion well money were cheap before the interest straight hiked so now all of the commercial loans need to be refinanced at 5% or there about well 5% Plus or there about in 2023 that number was $ 107 billion next year the total number is going to ramp up to 350 year after to 750 and by 2027 $1.5 trillion have to be refinanced at new interest rates now that statistic would be okay if Federal Reserve would not estimate that 37% of companies are close to default and also Moody said that the three-month trailing average of default rate has doubled in the last six months so what does it mean some people know where those products are who's holding it and what are the constituents there but that's not the entire Market creating opportunities for people to act on different pieces of information this as symmetry of informations is what creating creates inefficient markets resulting in financial crisises resulting in larger requirements for Capital to be put out and so on and so forth now the way people think about blockchain is mainly on the left hand side right this is what we think about blockchain we think that you know it's tokenization to reability scalability transaction finality Etc the biggest value and I canot stress this enough comes from the Real Time information leveraging the real time information what Copa has done for the last six years we ramped up to about hundred billion dollars of contract value traded every month with 10,000 risk reducing settlement events which are being flushed out of a system in terms of the risk every 4 hours 24/73 365 with eight people in Middle office now those people do not have fails because they work on blockchain WE leverage this information will leverage the technology to basically drastically reduce how many people required to operate the markets and they're not to dissimilar to traditional markets that people operate in today so one of the things that we also wanted to mention is that on the tokenization front this is another interesting topic that's been quite uh overused tokenization on its own it doesn't matter the application of tokenized assets is what the really the true power comes out so what what copper launched here in Abu Dhabi today is a business which basically takes the infrastructure that we've built over the last six years and service over 500 customers for and want to apply it to traditional markets because we prove that this works in crypto and this could have phenomenal effects in traditional markets we also bringing traditional markets with us so there is cost connectivity to traditional finance and we also making sure it's cross compatible across the existing ecosystem obviously there are quite substantial improvements that could be made by putting this onto contracts which will create clearing and settlements much faster and reduction in the staff that required for middle and back office will make it cheaper I mean that on its own creates a much better environment for the clients however due to the existing due to the new shift in variables that are required to create and run Financial products we will see better Financial products that hasn't existed there before because they were not economically viable but that's the conversation for 2024 thank you very much