Two blockchain leaders might join forces

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Two of the biggest names in the blockchain space could become partners.

R3 CEV, a leading blockchain innovation and development consortium group that has partnered with more than 40 financial institutions, and Ripple, a blockchain-based cross-border transfer firm, could join forces sooner rather than later, according to a tweet from Ripple CEO Chris Larsen.

Blockchain technology, best known for powering Bitcoin and other cryptocurrencies, depends on a distributed ledger that allows stakeholders to verify transactions without an intermediary. Blockchain is becoming more popular among financial institutions because of its potential to boost payments efficiency and security.

Ripple’s protocol could act as a transfer option for banks using Corda, R3’s proprietary distributed ledger platform, according to Bank Innovation. And Corda, in turn, could solve what R3 views as a security loophole in Ripple's protocol.

R3 CEV said last July that Ripple's transfer platform depends too much on third parties to verify transactions, which could create a significant security risk. Corda, however, restricts verification access only to parties directly involved in a transaction, which makes said transaction far more secure than a typical blockchain.

The partnership would also benefit Ripple, as the Corda integration could expand Ripple's exposure to more banks while simultaneously increasing security. Blockchain tech benefits from a large network of banks, so this partnership could accelerate the real-time implementation of this tech throughout the financial world.

Security is paramount as blockchain moves toward mainstream adoption. Most financial services companies are working with blockchain in some form, either through partnerships or independent innovation. But many of these companies have shown concern about security. Partnerships that alleviate these security concerns could convince those on the fence to adopt blockchain tech.

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.