Forbes: Nasdaq Vice President of Blockchain Innovation - Why is Nasdaq more optimistic about the prospects of blockchain than it was three years ago?

Baozou Comment : Although blockchain technology still has a long way to go before it can be widely adopted in the capital market, it is more promising than we expected three years ago. Nasdaq is mainly interested in three major areas of blockchain applications: post-trade management in the capital market, regulatory transparency, and the relationship between asset issuers and asset investors. We are all very optimistic about the development momentum of blockchain, and Nasdaq also hopes to use this technology to help them upgrade their back-end transaction processing processes and improve efficiency.

Translation: Nicole

As Nasdaq’s vice president of blockchain innovation, Fredrik Voss is one of the most experienced executives working with blockchain technology, a technology many believe will transform financial services, among other industries.

According to a recent report by Bain & Company, 80% of financial market participants believe that the technology will transform their industry and expect their companies to adopt it by 2020.

Nasdaq was the first financial services company to create a product using bitcoin technology, called Nasdaq Linq, which uses blockchain technology to control capital tables, a tool used by private companies to manage their assets. Since then, Nasdaq has also tested its blockchain-powered electronic shareholder voting system in Estonia.

What is Voss’ conclusion about blockchain based on his experience? He said:

“There’s still a long way to go before we see widespread adoption of blockchain technology in capital markets, but it looks like blockchain technology is more promising than we thought three years ago.”

In the latest episode of my podcast, Unchained (listen on Google Play, iTunes, Stitcher, or TuneIn Radio), Voss talks about what he’s learned from his work in blockchain: how Nasdaq evaluates whether a project could benefit from blockchain, how the technology will be developed for wider use, and why he thinks blockchain is a “special set of goggles” for regulators.

Broadly speaking, Voss said Nasdaq is interested in three main areas where blockchain could be applied:

“Post-trade management of capital markets, regulatory transparency, and the relationship between asset issuers and asset investors.”

Linq's product solves the problem of the last application and takes a system that typically has paper certificates, which then become obsolete when newer certificates are available, while making that system more efficient, more electronic and less prone to error.

The blockchain-based electronic shareholder voting system solves several problems. People can participate and vote remotely, and shareholders can vote through remote delegation.

Voss said:

“If you own stock in the company, you get tokens equal to the value of the stock you own, and then I can transfer those tokens to [someone] to vote on my behalf. We can track the whereabouts of those votes, which solves the problem that if you’re a proxy, it’s hard to prove to your voters that you followed instructions.”

The company also launched a financial framework that allows users to combine different types of blockchains with traditional databases, giving companies the flexibility to move from one model to another.

Voss noted that since Nasdaq has been a “technology company that’s been in the financial space for over 20 years… blockchain is not that new to us.” However, he also said:

“The good news is that even if blockchain doesn’t play a big role in capital markets in the long term, it has sparked a debate about how we build our ecosystem. It’s also forced market participants to come together and discuss some collective utilities, such as how do post-trade plumbing work satisfactorily? Are we satisfied with the level of transparency we provide to regulators? This technology has really encouraged financial markets to look at some of its problems in a new light.”

In addition, he said, recent financial technology innovations have occurred on the front end of transactions, but blockchain has begun to help them upgrade the back-end transaction processing process, where transaction details are finalized and approved, and cash and securities transfers are arranged.

He also noted that the technology could help facilitate collaboration between Nasdaq and regulators. The company "could provide them with a special type of node in a blockchain ledger network that would allow them to see what's happening on a much broader scale and with more transparency than they have today. (A node is a computer that is part of any particular blockchain network.) This could allow regulators to get a much faster and detailed understanding of potential concentration risks in a market or ecosystem, or systemic risks in a market."

Listen to the full podcast on Unchained (Google Play, iTunes, Stitcher, or TuneIn Radio) to learn how the technology should be developed to achieve wider adoption, why the company partnered with blockchain enterprise firm Chain (you can learn about the startup in my magazine column), and why he believes blockchain adoption will not be slowed down by the capabilities of the technology itself.

Additionally, he offers advice to other companies looking to adopt blockchain technology in their products and services — what they should do, what they shouldn’t do, how they should think about it and who should be involved in the conversation.

These are the show transcripts for the Unchained Podcast. You can listen to the full interview with Fredrik on Google Play, iTunes, Stitcher, or TuneIn Radio.

Laura Shin hosts the Unchained podcast (Google Play, iTunes, Stitcher, TuneIn) and writes the Millennial Game Plan. Disclosure: I own some Bitcoin and Ethereum.