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3 Ways We’re Building the Blockchain for Capital Markets

October 12, 2018

Welcome to the future of finance

What Bitcoin created in 2009 wasn’t just a revolutionary technology, it was the inception of a movement.

The principles of the Bitcoin movement include autonomy, peer-to-peer transfer, and security by distributed transparency.

Applying these principles to the capital markets, they read as: transfer value faster than it is currently being transacted by removing friction points and secure that value by disintermediation. This could also be explained as reorganizing the system in such a fashion that the benefit is delivered directly to the issuers and investors.

The future of finance is a streamlined system supported by a secure global network that puts people in charge of their assets. This is exactly what we have been building and look forward to launching soon.

As we continue to build and prepare to share the Equibit network with you, we’re focused on ensuring that this dedicated blockchain network lives up to the movement that Bitcoin started. This is the next generation and democratization of equity and debt markets.

Here’s how we’re building the capital market of tomorrow:

We’re removing third parties instead of replacing them

Intermediaries cause confusion, complexity, and cost within the financial system. Blockchain technology makes it possible to remove these third parties and streamline the process of transferring value significantly.

"The Bitcoin blockchain provides an unparalleled peer-to-peer payment network, so we’ve forked the Bitcoin blockchain to build a fully customized and public blockchain for capital markets."

While the Bitcoin blockchain served as our inspiration for developing a disruptive marketplace, we wanted to review the various possible approaches to putting securities on the blockchain. To do this, we compared how a fork of the Bitcoin blockchain would operate in contrast to Ethereum smart contracts. In our review, we found that Ethereum smart contracts would provide blockchain functionality, but would only replace intermediaries, not remove them. Additionally, smart contracts could add confusion to securities issuance, using a different contract for each component of that process. The Bitcoin blockchain provides an unparalleled peer-to-peer payment network, so we’ve forked the Bitcoin code to build a fully customized and public blockchain for capital markets.

You won’t know it from the smooth user experience we’ve designed and implemented, but the Equibit network also performs atomic swaps, seamlessly trading cryptocurrencies between chains without involving a third party to reconcile the trade. We conducted our first successful atomic swap earlier this year between the Bitcoin and Equibit blockchains and look forward to being one of the first groups ever to offer UX-friendly atomic swaps to our users.

We’re focused on the end user

Issuers and investors are the lifeblood of any financial market, so we’re putting them at the centre of it. We’ve developed an issuer-investor communications protocol for easy and secure distribution of bid/ask orders, proxy assignments, meeting notices, MD&As, and much more. Transparent communication simplifies and removes much of the existing back office administration, speeding up processes and cutting costs.

"...technology is only as good as the user experience..."

The Equibit blockchain also puts transparency first when it comes to market information. The nature of blockchain technology means that data on completed trades, interest payments, and earnings distributions is stored publicly and be examined at any time by anyone connected to the network.

We believe that technology is only as good as the user experience, so we’ve made UX a top priority. Equibit Portfolio is your market research  dashboard and wallet where companies and investors can seamlessly transact on the platform. The Portfolio application allows you to transfer, buy, sell, authorize, and cancel securities. It also employs Bitcoin functionality, making it possible to easily complete trades and communicate securely with other market participants.

We’re ensuring the security of assets

Removing intermediaries means that our security must be industry leading. For the Equibit blockchain that means employing the latest cryptographic hash function, Secure Hash Algorithm 3 (SHA 3), an upgrade from SHA 256 which Bitcoin uses.

Further to our smart contracts research, we found that Ethereum smart contracts wouldn’t serve our security needs because the applications running on Ethereum are exposed to every other application on the network.

The future of hashing is in specialized hardware. SHA-3 cryptography well outpaces SHA-1 and SHA-2 when it comes to hardware-based hashing. And noted by the Keccak team, SHA-3’s hashrate is better suited to industry use by “an order of magnitude higher than SHA-2.”


Read more about the benefits of issuing securities on the blockchain here.

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