Danske Bank has been a member for some time of the R3 Consortium, a group of more than 75 banks around the world who are seeking answers about DLT (distributed ledger technology). The consortium has created Corda, a distributed ledger platform, giving member banks a realistic way to harness blockchain. (The first version of Corda was released in October 2017.) Although they’ll eventually need to compete against each other, R3 is about organisations working together to build the new technology frontiers. I spoke to Danske’s global head of blockchain, David John Grundy, who recently relocated from London to Copenhagen.
“The concepts of the technology go back way before people realise,” said David. “People were first talking about smart contracts 20 years ago. Another key point is that bitcoin is not in itself blockchain, but rather blockchain is one of the core components that bitcoin is built upon.”
He continued, “Ethereum enhances on the original concept by providing a framework to facilitate the transfer of value, which can be any asset, not just cryptocurrency. There are fierce debates regarding the question around public versus private blockchains, which I’m sure will continue for a long time to come.”
David said, “I spend a lot of my time on education – hype versus hysteria.”
I asked David about Ethereum’s recent blunder, where tokens were locked, leaving owners unable to access them. He pointed out that the problem is in the app – not the operating system.
David said, “It’s not necessarily Ethereum that’s broken, it’s the app. You have to remember these are all nascent technologies with improvements happening every day, as we move towards more feature rich versions and stability.”
David noted that intra-industry collaboration is crucial to making the most of blockchain’s potential.
He said, “Now that we understand the technology there are many areas that could potentially be disrupted, but the key question is how we as an industry get together to achieve this, and what is the business case for doing so.”
When will blockchain applications be a reality?
“Fringe applications will be rolled out within five years,” David said. “Large scale change involving penetration into the core models that we currently work with? That will be five to 10 years away. Depending upon commitment levels, anything that touches legacy systems and models could take that long.”
Are there specific applications that Danske Bank is exploring in blockchain?
David said, “Not that I can discuss right now, but I will say that we are involved on many levels in a number of interesting and key areas. There’s a big future in this space, and we want to part of making that happen.”
What will Dankse’s future in blockchain look like?
“For sure, we will expand our interests outside the R3 Consortium, but R3 will continue be a key part of what we do. There are a lot of interesting things happening in blockchain within the Nordics right now,” he said.
In which areas will we see revolution?
“Settlement, payments, trade finance, global supply chains are all good examples,” David said. “It is not just a technical question but also whether there’s a viable business case for change.”
I read about your partnership with Maersk, the global shipping giant. (I can see a huge stack of Maersk shipping containers across the water in the Belfast docks, as I speak.)
David said, “In the shipping industry in general, there are interesting projects dealing with purchasing, payments, insurance, hedging, asset transfer, as well as tracking products all the way from origin to destination. Not all necessarily blockchain-based but it certainly could have a big part to play.”
Could cryptocurrencies lead to the emergence of online “nations” that are region-less and state-less?
“Technically you could do that,” David said, “but in reality I don’t see it happening. At its core I feel blockchain has forced people to think differently, and that’s good. The decentralised model is interesting and it has an effect on forcing people to explore and challenge the norm.”
Is the next offshore tax haven going to be online, digital currency-enabled?
David said, “The technology theoretically could allow for everything to be tracked, then avoidance would actually be harder. Blockchain has options depending upon the application. You can go completely anonymous or you can allow a view into it by the right authorities.”
“At the end of the day, no one can stop blockchain, you’d have to shut down the internet to make that happen.”
He went on, “However, I believe the legal system also has to get to grips with understanding the technology. Where is the recourse if something goes wrong?”
Can ICOs be trusted?
“The hype factor causes problems,” said David. “In many ways it’s a bit like the Wild West. It’s true that you can waste a lot of time and money on a traditional IPO, so the concept of raising capital via ICO is interesting.
“Some forms of ICOs have been done in an authentic way, others I might suggest have not,” he concluded.