Blockchain
innovation
in wealth
and asset
management
Benefts and key challenges
to adopting this technology
Contents
Overview......1
What is a blockchain .2
Applications of blockchain to wealth and asset
management .3
Use case 1: client onboarding
and profling ..5
Use case 2: model management
and trade order generation ....6
What are some challenges to adoption ..........8
A practical approach to blockchain ......10
Sample opportunity framework
approach .......11
What to do next .......12
1Blockchain innovation in wealth and asset management|
Introduction
Overview
Blockchain, the underlying technology of bitcoin,
is drawing signifcant focus and investments from
many fnancial institutions in the industry. Given
the technology’s potential to both disrupt and
enhance processes and systems, many frms have
recently dedicated resources to understand and
integrate blockchain into their businesses.
This article will discuss how wealth and asset
management frms are seeking out opportunities
to harness the benefts of blockchain as well as key
challenges to adopting this technology. Further,
the article will highlight near-term practical
applications for blockchain and how to approach
blockchain innovation.
Evolution of blockchain
technology
Blockchain technology as we know it
today emerged in January 2009 as
the underlying technology of bitcoin.
While bitcoin created initial noise in the
fnancial world, blockchain technology
gained prominence as a hot topic of
discussion by itself.
Continued development
As funding from venture capital frms
continued to increase, what was
considered the next generation of
blockchain technology emerged in 2014
to include “smart contracts.” The new
programmable blockchains feature
conditional logic, allowing contractual
scenarios and terms to be coded.
For example, a condition could be
designed to release a defned amount
of payment to participant A once
participant B delivered a specifc asset.
2|Blockchain innovation in wealth and asset management
What is a blockchain
A blockchain is a shared record of all transactions and related information
for a particular entity. This shared record — a distributed ledger or
database — is visible by all parties with permission to the record. A
blockchain comprises an ever-increasing set of transaction data blocks
(see diagram below) that are verifed by members of the network, traditionally
referred to as “miners.”
Each block is a set of transactions between two or more parties (e.g.,
counterparty A pays counterparty B in exchange for an asset) and added
to the existing chain of blocks, creating a complete history of transactions.
With each additional block, the entire distributed ledger is synchronized
and agreed upon by all participant nodes. All nodes are continuously validating
the transaction history, resulting in a blockchain of immutable data.
Block 355Block 356Block 357
Inception-to-date
record of
transactions
Inception-to-date
record of
transactions
Inception-to-date
record of
transactions
New transactionsNew transactionsNew transactions
2341
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