home Repair Blockchain - what is it in understandable language. Blockchain at Sberbank: interest in new technology Where is blockchain technology used?

Blockchain - what is it in understandable language. Blockchain at Sberbank: interest in new technology Where is blockchain technology used?

He told how he earned 8 million rubles from cryptocurrency in six months. Let us remind you once again what blockchain is in simple words, and give examples of the application of this technology in practice. Did you know that the Central Bank, the Ministry of Health of the Russian Federation and other organizations are already mastering blockchain? Then quickly read our new article.

Basic concepts: blockchain, bitcoin, mining

Blockchain technology was created in 2008 by Satoshi Nakamoto. It was he who came up with the idea of storing encrypted data not in one place, but inconsistent block chain. Blockchainis nothing more than a database distributed across blocks. Each of these blocks stores information about the previous block, and so on along the chain ad infinitum. All this data does not have a single owner - it is stored on different computers. This is the world's information, owned by everyone and no one.

Cryptocurrency- this is virtual money, it can be bought or earned (mine)every. The most popular currency in the world is the onebitcoin. To mine bitcoins, you need special computers - “farms”.

it clearly shows how this is done. The guys equipped a premises for “industrial” mining, bought 50 farms and began renting out free space. For storage and maintenance of other people's farms they took 30 percent of the profit. In just six months, the profit amounted to 8 million rubles with a starting capital of 6 million.

What does the blockchain system include?

How they write The entire global blockchain system is divided into 3 large classes:

Classic blockchain and its decentralized payment systems, for example, Bitcoin and other cryptocurrencies. Anyone can access them, and the entire community is the administrator.
Blockchain services - for example, CoinBase or Circle. They provide public blockchain services, are registered in any jurisdiction, and have an account in local currency.
A private blockchain for their own, which is created by organizations to reduce IT costs and speed up the registration of transactions. For example, how the Central Bank, the Ministry of Health, and foreign companies began to do this, examples of which we will give in this article.

Pros of blockchain

1. Security

In other storage systems, all data is processed in a single server - this is the main center, the brain, and if it is hacked, the information will be lost. The whole point of a chain of blocks is precisely that there is no single center, and each block stores information about the previous one. For example, data about the amount of your bank account, marital status or medical diagnosis will be distributed among all computers on the network.

Remember the movie “I Robot”, where everything was controlled by the central computer VIKI? One day he got out of control and organized a robot uprising. The only way to cope with the brutalized machine was to kill it, which was done.

2. Immutability

Changes can be made to the same single center if hacked. If hackers had hacked the same WIKI and changed the data stored in it, they would have been able to change the behavior of the machine. Data stored in the blockchain cannot be changed or faked. Even if you hack and replace the information in one of the blocks, things won’t go further than that, because the other blocks are also encrypted. It will take hundreds of years to find the codes for all of them.

3. Openness and transparency

The blockchain paradox: the data is unknown to anyone, but at the same time anyone can view it if they wish. For example, Vasya Pupkin transferred 100 thousand rubles to Kolya Tyutkin - this data is in the public domain, which means everyone can see it. At the same time, the names of the recipient and sender will remain secret - why does everyone need to know personal information?

4. You can send amounts without intermediaries

According to the creators, using the blockchain you can send small transfers without a commission charged by the intermediary. If previously banks, exchangers, and transfer systems took a certain amount for intermediation, now you can do without them. The scheme is simple: rubles or dollars are transferred into cryptocurrency - a percentage is taken, and your recipient transfers them back into “normal” money.

5.Speed of operations

This is really cool: the blockchain system automatically carries out calculations - creates an application, checks whether there are enough funds in the account, debits the money, and so on. Accordingly, transaction time is reduced, and there is no need to spend resources on documentation, staff paperwork and other bureaucracy.

Transaction time is reduced, there is no need to spend resources on documentation, staff paperwork and other bureaucracy

Disadvantages of blockchain

Yes, the world has gone crazy with cryptocurrencies, but those same tokens (digital shares) are in most cases bought and sold illegally. This means that something will happen - and there will be no one to even present it to. The legal status of blockchain technology is still in its infancy.
Unlike standard payment systems - for example, Visa or MasterCard - blockchain cannot yet process as many transactions in a short time. If the former process approximately 45 thousand transactions in one second, then Bitcoin processes only 7 in the same time.

Areas of application of blockchain

Now we come to the specifics. Currently, blockchain is used in practice in the following areas:

financial operations,
legal transactions,
logistics,
vote,
Copyright
and even medicine.

Let's take a closer look at some of them.

1. Data logging

Storing a database of various kinds of institutions is, perhaps, one of the most relevant ways to use blockchain. This is invaluable for the medical field, property registration, civil registration, etc. Many companies are already offering their services. For example, Factom, together with the government of Honduras, is developing a program for convenient and secure registration of land ownership. The same company is collaborating with Georgian firms to create a property registration system for the country's public registry.

A very illustrative example is the use of blockchain in medicine. The young company Guardtime, together with the Estonian Electronic Health Foundation, is transferring more than a million medical records of the country’s residents to the blockchain. Thanks to blockchain, Estonia will get rid of the eternal hesitation of medical institutions: somewhere something was not recorded, lost, forgotten. Now all changes will be displayed in the database online. Whether there is a new record, a referral to a doctor or test results, all this will be automatically entered into the system and will remain there forever. Similar technologies will soon start in China, the Netherlands, and the USA. Perhaps the Russian Ministry of Health will soon follow the path of progress.

Blockchain will also be invaluable for registry offices around the world. With such a database there will be no confusion: people buried due to an error in documents or spouses who are listed as divorced on paper, but in fact have been living together for decades. Once again, Estonia distinguished itself: together with the Bitnation company, they are introducing a civil registration system for residents.

It’s not for nothing that the Bitnation company calls itself an electronic state: the database will store all information about marriages, births of children, deaths, etc. And, what is valuable, this information will be legal evidence of a marriage or the birth of a child.

The first blockchain wedding was the ceremony of Joyce and David Mondrus. They simply entered the data into the blockchain and reported it to the whole world by showing network users a QR code associated with the transaction where the wedding data was stored. This was enough - the young people officially got married, and this was enshrined at the legal level.

Storing a database of various kinds of institutions is, perhaps, one of the most relevant ways to use blockchain

2. Data storage

We are used to storing data - photos, videos, documents - in cloud services such as Yandex.Disk, Dropbox, Google Drive and others. This is a classic example of storing data in one place. The likelihood of cloud services being hacked is high: ways to “hack the cloud” can be found in the public domain on the Internet. Blockchain technology offers to store data in a P2P network. This means that the data is not stored in a single center, but in several blocks. Anyone can have multiple copies of data in different parts of the network. It is clear that access to such storage is much more difficult.

Storj has developed a fundamentally new alternative - decentralized cloud data storage. Each user who has free disk space can rent out free space to others. Of course, for money - our own cryptocurrency Storjcoin X. All data is divided into blocks, encrypted and distributed between the owner and tenants. It is more reliable and cost-effective than centralized clouds.

3. Gems

A girl's best friend, diamonds can also be converted into cryptocurrency. It's no secret that the world of buying and selling precious metals and stones has a high crime rate. Diamonds are easy to smuggle, they are used to sponsor terrorist acts, and they are convenient for laundering money. In short, the scope for criminal acts is enormous.

Everledger has created a data registry using blockchain technology that makes it easy to identify any stone. A special digital passport has been created for each diamond, which displays all completed transactions. Thus, it immediately becomes clear whether the transactions performed are legal or not.

4. Financial transactions

The Central Bank of Russia also recognized the benefits of the new technology. Of course, this will not happen right away; we will not switch to cryptocurrency yet, but the main efforts will be devoted to legalizing blockchain in the country.

The MasterChain platform has already been created based on the Ethereum blockchain., which is positioned as the first legally pure blockchain. The system helps to quickly make payments, confirm the relevance of data, and create financial services. According to the leadership of the Central Bank, blockchain is most relevant in five projects in the financial sector:

prototype of a distributed database - for exchanging financial messages,
A digital letter of credit is an account where money is reserved for transactions. There is talk of using this project in trade between Russia and Belarus,
depository accounting accounting of securities electronic invoices,
exchange of information for the KYC system - Know Your Client, which is used to determine the identity of the counterparty before conducting a financial transaction,
electronic bank guarantees.

5. Electronic voting

Everyone knows about carousels, ballot substitution and other data falsifications during voting in elections. Blockchain can eliminate all fraud - after all, data during online voting will be unchanged and transparent.

And let us remember Estonia again - despite the stereotypes about the slowness of this nation, they are already ahead of half the planet in high technology. Among other things, they are going apply blockchain to simplify the voting procedure among company shareholders.

Russia has also distinguished itself - business ombudsman Boris Titov has already proposed using blockchain voting in the presidential elections in March 2018. Theoretically, by this time it will already be possible to test it in a couple of regions.The liberal-conservative Growth Party is already testing an electronic voting system. Thanks totechnology of a verifiable register of transactions, voting can take place without reference to the place of residence. That is, citizens will not have to drag themselves to the polling station - everything will take place on the Internet. At the same time, the anonymity of votes will be preserved, and falsification will be excluded. The Growth Party intends to submit the test results to the Central Election Commission.

Blockchain can eliminate all fraud - after all, data during online voting will be unchanged and transparent

Of course, it cannot be said that the old world of payment systems and information storage will be “destroyed to the ground.” Not everyone trusts new technologies, especially such sophisticated ones. Therefore, most likely, blockchain will occupy a certain niche and will peacefully coexist with classical schemes. Wait and see!

Recently, many of us are increasingly faced with the concept of blockchain. What kind of system is this? Unfortunately, not everyone knows about this, although it has very promising chances for development and implementation in everyday life. Let's try to describe what blockchain is in simple words. To top it all off, several examples of the use of new technology will be given, and the advantages and disadvantages of the global information structure will be discussed.

Blockchain: what is it?

The system itself appeared relatively recently. If you do not delve into the main technical aspects of operation yet, blockchain technology is a clearly structured database with certain rules for constructing transaction chains and access to information, which excludes data theft, fraud, violation of property rights, etc.

In addition, when working with it, only two parties are involved, without the involvement of intermediaries for conducting transactions of any type. If we talk about what a blockchain is, in simple words, the technology can be compared to a kind of transparent safe, say, made of impenetrable glass, into which every registered client (user) can put something. At the same time, everyone else sees exactly what is put there. But you can take something from the safe only if you have certain access rights, roughly speaking, a key known only to the person for whom it is intended. As is already clear, the safe cannot be hacked or broken. But, in fact, this is a rather primitive comparison.

In a sense, the blockchain system can be represented as a kind of global ledger, in which the basic rules for storing and distributing information are described using mathematical means, excluding access to it from the outside even at the level of registered clients or administrators. It is not difficult to guess that this system does not have any one manager as such.

How does blockchain work?

The main principle of the functioning of the new technology is the transparency of transactions performed with the impossibility of changing them by persons who do not have authorized access to it. The ancestor is considered to be the Bitcoin system, which was once created in the form of a self-regulating cryptocurrency that does not require servicing by financial institutions or banks. It used the blockchain platform to record any type of transaction. Any blockchain wallet works in a similar way, for example, the same Qiwi system.

You can understand the basic principles of the functioning of a global database using the example of the structure of DNA. It has its own chain of transaction blocks (transactions, payments, etc.). Moreover, after any transaction is completed and confirmed (according to established mathematical rules), a new block is added to the chain. And each such block, like a DNA cell, contains information about the entire network as a whole. Thus, blockchain technology inherently makes it impossible to add a fake block or remove an existing one, since this will be immediately visible throughout the system. Roughly speaking, you cannot add something to the structure that should not be there. When a block is deleted, the system reacts in the same way to changes in the global structure. So it turns out that fraud, attempts at unauthorized intervention, or even piracy are almost completely excluded.

Main Applications

At the stage of its emergence, blockchain technology (from the English block chain) was used exclusively for cryptocurrency, and a little later it was adopted by some banking structures.

However, today in its development the new system penetrates quite deeply into our everyday life. Platforms for developing business applications based on blockchain technology can even control compliance with copyrights, tracking the production processes of a particular product for compliance with the stated standards, not to mention absolutely all financial transactions.

Main platforms for building business applications

Among the most advanced and frequently used platforms on which business software products can be created are the following:

EmcSSH.
EmcSSL.
Emc InfoCard.
EmcTTS.
Emc DPO.
Emc Atom.
Emc DNS.

Let's consider each of them separately.

EmcSSH

From the point of view of the EmcSSH platform, which is an additional extension of SSH technology for network administration, blockchain is a kind of specialized storage of public keys (passwords) and lists of users entitled to authorized access.

For example, a network user has access to several machines. This is done using a password-protected secret key file stored on the blockchain, which eliminates the possibility of hacker attacks called MIM (“man in the middle”). If the impossible happens - the file is stolen, then the user can instantly change it to a new one or block access.

This technique is most effective in cases where it is necessary to manage a large number of servers, a network of ATMs, remote computer terminals, etc. What is most interesting is that such global control can be carried out regardless of geographic location, and with the same simplicity as when working on a regular local network.

EmcSSL

It is an extension of the custom SSL protocol. For him, blockchain is a place where so-called digital fingerprints of certificates of individual users or organizations are stored.

When entering, for example, a bank’s website, and exchanging information between the user and the online banking system, the user’s authorization occurs precisely on the basis of such certificates, which makes it impossible for third parties to steal passwords, codes or keys. If a client loses a certificate, the procedure for restoring it is simplified quite greatly, although it has some inconveniences in terms of restrictions imposed (the restoration service is paid, and the process itself requires quite a lot of time).

Emc InfoCard

This platform is based on a system of electronic business cards, inextricably linked with user SSL certificates. Unlike the latter, such business cards are convenient because the information they contain can be changed.

When entering a certain Internet resource that supports this technology (for example, a blockchain wallet), authorization occurs precisely on the basis of a virtual business card, and information from it is downloaded automatically. The convenience of such a system is that when the data in a business card changes, it changes on all resources where it is registered, simultaneously and completely automatically. So the user no longer has to re-fill registration fields on a huge number of sites manually.

EmcTTS

The TTS system is a means of recording posted documents of any type in time, creating a fingerprint of the moment of their publication.

This technology is indispensable in legal matters when it is necessary to prove the authenticity of a document, contract, patent or even copyright publication. Using a time stamp, you can easily check not only the date of issue or publication, but also the time with an accuracy of up to a second. And in jurisprudence this can sometimes play a key role.

For example, there are two companies that have entered into an agreement to provide some services. The first one, after signing the contract, published it using TTS technology. The second company did not know about this, and after some time it began to arbitrarily make changes to the contract, citing an allegedly lost copy of its own, and even stating that some clauses were spelled out in the current edition it proposed. There is nothing easier than proving the first company right by the temporary imprint of the publication.

Emc DPO

The DPO system is another offshoot of the core technology used to prove rights to any property, physical or intellectual.

Simply put, based on unique numbers or characteristics, the use of such technology can confirm, for example, the right to own a car, house or apartment, land, software development, etc. Cadastral numbers, registration certificates, serial numbers can be equally used software licenses, and in some cases, say, for real estate - location, etc. With such a system, re-registration of property rights is very simple. It is enough to perform a simple operation to change data in the blockchain. As is already clear, access to such processes can only be obtained by persons who have the right to do so, and outside interference is excluded.

Emc Atom

Atom is a system designed to conclude transactions between two parties without the participation of a third party or intermediaries.

To be clear, in some cases, when transferring property rights or concluding contracts, two parties are forced to contact a notary, a law office, a bank and other organizations. In this situation, their participation is not required. Registration in the case of a transaction with property, when the seller has received money, and the ownership has been re-registered to the buyer, and is a confirmation of the legality of the transaction with a preliminary verification of the ownership of the property by the seller, and in the future - also with confirmation of the ownership of the new owner. True, this approach can only be used if both parties trust each other unconditionally.

Emc DNS

Finally, another platform is an alternative system for distributing domain names in networks, preventing attackers from attacking the DNS.

It is believed that with the use of such technology, any distributed network connected to the Internet becomes practically invulnerable.

Fast transactions

This type of technology is designed to facilitate micropayments with minimal cost and expense. Such calculations can have extremely small amounts (even fractions of kopecks).

Since all transactions carried out are virtual, the system allows you to remove any restrictions on speed in the so-called TPS metric, despite the fact that any calculation has its own cost, expressed either in monetary terms or in the resources consumed to complete it.

Advantages and disadvantages of the system

Finally, it remains to be said that the advantages of the blockchain system are quite clearly expressed. The most important thing in technology is impeccable reliability and, as stated, absolute safety. Despite this, today there is active debate about the feasibility of widespread implementation of such technology. Bankers, by the way, are in no hurry to use it because of the low speed of operation, which initially depends on traffic, although they admit that speed has a lower priority compared to the reliability and security of the operations being carried out.

But any consumer, using blockchain technology, can even independently check the quality of the purchased product by tracking the entire production and supply chain to ensure that the purchase actually meets the specified standards.

However, it is still too early to talk about the global implementation of this technology, the emergence of which, according to many experts, is comparable only with the emergence of the global Internet. And there are still not as many applications created on its basis, not to mention the organizations that use them, as many would like. However, most experts are inclined to think that blockchain has a great future. Whether this is true or not, time will tell. We can only hope that this system will not suffer the fate of the Bitcoin cryptocurrency, which it was recently decided to abandon.

As they write in their book (M., Alpina Publisher, 2018) Artem Genkin And Alexey Mikheev:

« The interest of banks in the new technology is understandable: potentially, blockchain technology can be used to eliminate the bank as a necessary link in the entire financial and economic system. Therefore, in addition to purely applied research into the possibilities of blockchain to integrate this technology into their internal processes, bankers are also looking for ways to maintain their place as an intermediary in economic processes. After all, in the end, blockchain is just a technology that can be used in different ways.».

Discussions about the use of blockchain in the banking sector in Russia have been going on for several years, but things have not yet come to any widespread use of distributed registry technology. Blockchain is being adopted by the financial sector much more slowly than one might expect, judging by the noise that has arisen. The attempts of banks to take advantage of the popular technology can be counted on one hand, and all these examples are far from everyday practice.

In the forefront, of course, is Sberbank, which exchanges information on factoring operations with the client company M.Video. In addition, the largest Russian bank will conduct relevant research and create product prototypes. At the very end of last year, an exchange of encrypted information was announced between Sberbank and the Federal Antimonopoly Service.

The largest private bank in Russia, Alfa-Bank, is also trying to keep up with Sberbank, which has begun developments in the field of blockchain in its Innovation Search and Development Center. In the summer of 2017, S7 Airlines and Alfa-Bank launched an innovative blockchain platform based on the Ethereum protocol and conducted the world's first transaction to purchase an air ticket through an open blockchain API. At the same time, as the bank reported, the speed of settlements between the airline and its partners was reduced from 14 days to 23 seconds. Also, the telecom operator Megafon transferred a million rubles from its account in Alfa Bank to the account of its subsidiary in Sberbank. According to feedback from participants in the experiment, the money was transferred instantly, whereas a regular bank transfer can take up to 30 hours. Last October, M.Video, Sberbank Factoring and Alfa-Bank announced the creation of an open consortium focused on the commercial use of blockchain-based solutions in the financial sector.

Vnesheconombank, together with MISiS, opened the Blockchain Commune Center for Blockchain Competence and Digital Transformation in December 2017. However, among the six pilot projects that Commune is involved in, there is not a single banking one: they are related to various areas of public services, such as registration of patents and real estate rights. As the adviser to the chairman of VEB told Invest Foresight Vladimir Demin:

« Blockchain in banks will develop more actively than in other areas. The opportunities that appear in fintech using cryptocurrencies and smart contracts can significantly reformat the banking industry. First of all, this applies to making payments and creating new forms of financial instruments (mortgage, letter of credit, guarantee, etc.)».

Theoretically, a very promising project is one created on the basis of Ethereum algorithms by the Fintech Association. Technically, Masterchain is already ready to conduct financial transactions on its basis. At the same time, according to the head of the digital transformation department of VTB Bank Alexey Chubar, first of all, we are talking about creating a service for issuing bank guarantees based on Matechchain.

As Alexey Chubar told Invest Foresight, “ VTB is currently developing a number of blockchain projects, one of which is a digital bank guarantee. The project is being implemented as part of our cooperation with the FinTech Association. As a demonstration of the capabilities of the technology, it is successful and in demand, because it allows you to test several approaches at once. Firstly, the ability to replace paper documents with structured digital ones and distribute them to interested parties. Secondly, the possibility of using smart contracts to implement routine operations.”

However, no one can yet say anything definite about the practical application of MasterChain.

Summarizing all these cases, we can say: at the beginning of 2018, banks were experimenting with blockchain, without trying to make it everyday practice.

“The largest credit institutions, including RosEvroBank, are already testing this technology. Together with our partners, we are developing several services for various b2b scenarios,” Deputy Director of the Information Technology Department of RosEvroBank told Invest Foresight Alexander Vasiliev.

The slowness with which the “romance” between blockchain and banks is developing can be explained not only by the fact that every innovation must be studied and tested. In many ways, the blockchain philosophy itself does not fully correspond to banking. Many banking functions can be successfully implemented on the basis of centralized registries, if only they are provided with appropriate security and customer verification loops.

Blockchain is primarily a system for exchanging conditional virtual values, for example, non-cash money. Thanks to complex technical solutions, such a system does not allow a network participant to transfer the same value twice. In conventional systems, this is monitored by centralized registries - banks, notaries, state real estate registries, etc. Blockchain provides technological guarantees of security and correctness of calculations instead of legal guarantees provided by banks and government databases. Thanks to this, cryptocurrencies arise, the circulation of which is possible based on the direct sending of messages by settlement participants to each other without the participation of an intermediary bank. That is, blockchain allows you to organize customer interaction without the participation of the bank. But if the bank is not going to “remove itself,” does it really need blockchain in its relationships with clients? In any case, in the “bank-client” system, almost everything that blockchain can do can be implemented using other, more traditional technological solutions.

In particular, the director of the information technology department of CB Geobank LLC told Invest-Foresight about this. Alexander Bychkov.

“Blockchain solves two problems: it guarantees the anonymity of operations and provides the opportunity to decentralize data,” the expert explained. – Banks don’t need either one or the other now. There is no anonymous banking in Russia, and decentralization is a very questionable thing for credit institutions. Decentralization is primarily needed for open data; There is no such data in banks. Almost all information is a banking or commercial secret. This is why most financial institutions are not interested in introducing new technologies. Don’t forget about the additional burden: developing new solutions will require attracting new specialists and expensive IT equipment. From my point of view, any current projects on this topic are nothing more thanPR-stock. The existing intersection of technology and finance fully covers the needs of the banking market in Russia. And in the near future, no serious implementations will happen.”

Director of IT Department at Novikombank Andrey Chuiko believes that one of the main disadvantages of blockchain is the speed of transactions, which does not allow the use of blockchain-based solutions when carrying out online transactions, where traditional systems currently have an advantage.

“For several years now there has been a search for the effective use of blockchain technology in the banking industry, and, unfortunately, there are no significant results yet (let’s leave cryptocurrencies and ICOs out of the equation),” stated Andrey Chuiko.

At the same time, a representative of Novikombank does not exclude that a positive effect from the use of blockchain can be obtained in systems based on smart contracts, which usually require obtaining the approvals and signatures of many participants for a particular transaction and executing the contract only under certain conditions. In these cases, blockchain helps reduce the overall execution time of transactions. Thus, promising areas for blockchain application, according to Andrei Chuiko, are factoring and letter of credit transactions, real estate transactions and transactions related to the transfer of rights to any property assets or securities.

“I believe that in the next 1-2 years we will see real industrial implementation of projects using blockchain technology,” Andrey Chuiko is confident.

Sberbank has developed and launched an educational program aimed at studying the possibility of applying blockchain technology in the structure of the work of a banking organization. The course was created to familiarize bank managers with new technologies, as well as to train leading managers to apply the acquired knowledge in their activities. The objective of the training course was to attract management staff to use blockchain technology.

Application of technology in banking

The training program includes:

considering possible ways to apply the technology in the financial sector;
overview of the main blockchain factories and platforms;
an overview of the basics of cryptoeconomics, which laid the foundation for this technology;
legal and regulatory criteria for the use of blockchain;
analysis of Sberbank programs where blockchain can be used.

The course is intended for internal use; in the future it is planned to promote the training program in other areas.

The popularity of blockchain technology is growing every day, which determines Sberbank’s interest in launching a training methodology. Sberbank has already carried out the first payment transactions using the IBM Blockchain platform. Sberbank sees the future of technology not only in its application in finance, but also in design developments.

What is the essence of Blockchain technology?

The founder of the technology is the Bitcoin system and methods of storing data in it. Information on completed transactions is grouped into a block chain. Each block contains information about the previous one. If you change the data of one block, this will entail changes in subsequent ones. It is impossible to delete or edit information in a block unnoticed; this will inevitably affect the entire chain. Thus, the technology ensures transparency of transactions and also implies access to information to all participants in the payment process. In this case, neither party can change the information without the consent of other participants.

The blockchain methodology is aimed at building a non-centralized system of relationships, where each participant in the process can analyze and control events. There is a special server on the basis of which a database with autonomous control is developed. The database is available to all participants in the transaction, while maintaining the principle of confidentiality.

The technique helps a lot in cases where the parties have not built a trusting relationship, but you have to work with a single base. The technology is used in settlements between financial institutions, concluding contractual relations and checking counterparties. Any hacker attacks when using technology are not scary.

What does blockchain mean for the banking industry?

The introduction of blockchain technology may negatively affect the work of the bank, eliminating it as an intermediary in the transfer of funds. After all, the bank inherently acts as a link between the sender of the transfer and its recipient. It guarantees the successful completion of the transaction and charges a commission for this.

Sberbank saw a number of advantages in the blockchain methodology:

high-quality data synchronization;
transparent relations between counterparties;
protection from fraudulent activities and changes in information;
conducting an asset accounting system;
Safe and fast transactions reduce costs for participants in the process.

Despite the strengths of the technology, banking organizations today do not consider it an overwhelming competitor to the classical banking scheme. At the same time, leading Russian banks are beginning to use blockchain in new projects.

So, blockchain technology implies an electronic document management system, the main principles of which will be openness and accessibility to all participants, as well as the absence of centralized management of the information base. The technique will reduce human resources and also ensure a transition to a new method of verifying the authenticity of documentation. Blockchain will help speed up the processes of data transfer and mutual settlements between legal entities. Conducting transactions for large amounts now does not have to be delayed for a long time. It is noted that when making money transfers, the transaction is recorded to the recipient instantly, unlike the classical banking system.

Sberbank, as a leading bank in Russia, takes part in the development and implementation of new technologies in the work of a banking institution. The practical application of the blockchain methodology will make it possible to create a single database with simultaneous access to it by all participants in the relationship. The launch of the methodology will be reflected in the work of a banking organization in the form of transparency of concluded transactions and the impossibility of carrying out fraudulent transactions.

\nMany modern industries are conducting various experiments with blockchain technology. However, practice shows that the most successful projects relate to the financial sector. This trend is also reflected in the practice of Russian financial institutions.
\nMany clients find it difficult to believe that just recently Russian banks were not interested in distributed ledger technology. The name “blockchain” is often used to describe it.
\nNaturally, Bitcoin is the most popular cryptocurrency in the financial market. Until a certain time, no one took her seriously. And cryptocurrencies themselves were associated with something forbidden (for example, arms, drug trafficking). At the end of 2015, serious changes occurred in this area - the interest of specialists in distributed registry technology increased. Ultimately, large financial organizations became interested in it. They created the R3 consortium with the goal of developing the use of blockchain technologies in the modern financial sector. In the spring of 2016, specialists from this association presented a project called Corda. This is a distributed registry that was created specifically for various financial services. After Corda's source code was published, Hyperledger joined the consortium. He joined IBM, Sawtooth, and other financial transaction systems.
\nPlatforms for developing applications using blockchain technology have been opened by the largest cloud providers. In addition, specialists are actively engaged in research in the field of distributed registry in the UK. They also began creating a roadmap. It is necessary to modernize the country's financial structure. A working group has been created at the Central Bank of the Russian Federation to thoroughly study the blockchain.

Features of the IBM C-Suite Study 2017

According to the IBM C-Suite Study 2017, a third of the companies that are experimenting and capable of implementing blockchain in 2017 are in the financial sector. This is not surprising, since blockchain allows you to work without intermediaries and also save significant money. Next, the prospects and possible areas of application of the technology in Russian banks will be considered in more detail.
\nDifficulties arising with international money transfers
\nCurrently, the system of cross-border transfers is far from ideal. Therefore, it is not liked by many users who have to pay commissions to banks. In addition, the system also does not suit modern banks. For this reason, financial institutions are forced to use the more expensive and less reliable SWIFT system (for interbank transfers). The case of Iranian banks being cut off from it showed that in this case major political risks may arise.
\nThe use of blockchain technology for organizing cross-border transfers is quite promising. The Bitcoin system, which knows no boundaries, has been operating successfully for 8 years. Of course, there are certain risks and problems in its work, but the blockchain has never been hacked.
\nThe simplicity and high reliability of distributed registry technology drew the attention of the largest banks. At the “Blockchain in banking” meetup, leading experts said that the use in international transfers was considered in trial projects on the use of distributed registry technology. Sberbank tested a scheme based on Bitcoin, according to which Kazakh and Russian banks issued their own tokens. Their clients could exchange them on the exchange. At that time, the use of cryptocurrencies could lead to some problems with the Law. For this reason, the business did not show much interest in the prototype. However, no technical problems arose.
\nToday, distributed registry technology in the field of money transfers is being tested in Singapore, England and other countries. There are several startups on the market that carry out all the necessary operations under this scheme. The most famous of them is Ripple. In 2008, Bank of Tokyo-Mitsubishi UFJ planned to open a money transfer system on this platform that could be used by individuals. After this, the organization will gradually move to serving corporate clients.

Problems with interbank settlements in the Russian Federation

In the modern banking history of Russia, quite a lot of crises have already been recorded (it was necessary to transfer funds from clients, but they were not in the correspondent account). This is a classic situation. After all, money should move freely. Therefore, banks strive to minimize their own balances. The issue is also resolved by short-term borrowing. However, if the reputation of the financial institution is questionable, funds may not be lent. In this case, the bank has to delay the client's payments.
\nDuring banking crises, delayed payments are commonplace. Financial institutions stopped transfers at the entrance, without crediting them to the client's account. Accordingly, the payment was not made. Moreover, the client did not even know which bank his funds were in. In this case, the account statement did not help resolve the situation. According to the statement from one bank, the transfer could go out, but according to the statement from another, it could not yet be credited to the account.
\nSome experts compare the blockchain to a transparent safe from which it is impossible to steal funds. This feature is attractive to many entrepreneurs. They could independently observe the amount transferred. The largest Russian integrator proposed to the Central Bank to create a similar blockchain system on a separate platform, Hyperledger Fabric. The requirements noted the need to ensure authorization of all participants, as well as differentiation of user access to a single system. A striking example of such a chain is that the regulator has access to all transactions, the bank only to clients’ transactions, and the client only to his own transactions.

Bank payments in the Russian Federation

The first test transactions (blockchain) were carried out between the largest banks of the Russian Federation in early October 2016. The specialists used technology based on the Ethereum code (with its own genesis block). The development of this platform was carried out by leading specialists from Otkritie Bank, Alfa-Bank, as well as Qiwi and Tinkoff Bank with the participation of the Bank of Russia. In mid-October 2016, the Fintech consortium was opened. It includes the 10 largest banks, except the Bank of Russia.
\nAt the Open Innovation forum, which was held in October 2016, one of the leading employees of the Bank of Russia reported that the financial institution had deployed two prototypes based on blockchain technology. Today transactions are protected by the Proof-of-work mechanism. In addition, it is planned to introduce Proof-of-stake in the near future. The alternative platform to Ethereum was the Hyperledger platform. In October 2016, Sberbank joined it.
\nIn December 2016, the Central Bank of the Russian Federation opened the acceptance of applications for participation in the tender for the development of a software package. It is planned that it will provide storage and exchange of financial information using distributed registry technology. Today, several banks, the Central Bank and the Qiwi payment system are preparing to launch pilot projects on the MasterChain. The Central Bank is preparing a pilot version to deploy a messaging system on the blockchain.

Credits and security

Modern banks spend quite a lot of time and money on checking customer information and identifying them. In order to solve the problem, Deloitte released a special platform, Deloitte Smart ID. Motivating the client to keep a record with information about himself in the blockchain chain is the main problem of using such a system in practice. If necessary, you can obtain confirmation from third parties (that the data is correct). Thanks to this, you won’t have to spend too much time checking information.
\nThe fraudster database is another possible case. Sberbank is currently dealing with this issue. In the pilot project, banks often enter information about attackers into a common blockchain. In this case, the law on the protection of personal data is not violated. Only the hash data of the scammers is recorded in the blockchain. Banking institutions require accurate data for credit scoring. Prospects for using blockchain technology are also available here. In this case, a common database of credit histories is created.
\nExperts pointed out another important problem. The fact is that after major scandals with large American banks, investors cannot provide guarantees that the (bank) reporting provided is correct. If blockchain technology is used, banks will not be able to falsify the conditions for providing credit funds (change the start date) to improve reporting. Therefore, the use of blockchain is beneficial only to reliable banks with a good reputation. Such financial institutions are able to prove their reliability to investors. In this case, it is much easier to monitor compliance with the standards established by the financial institution.

Document flow

FAS together with Sberbank opened a new project for creating document flow based on blockchain. The goal of this project is to get away from intermediaries, as well as document flow operators. At the same time, it will be possible to avoid large expenses for storing information in the operator database. The creators of the system (Sberbank, FAS), as well as its partners (Aeroflot, Russian Coal) cannot access what is sent by all network participants.
\nWhen choosing technologies, the developers were not chasing something modern and fashionable. The specialists sought to choose something that would significantly simplify the procedures, communication, and exchange of important information that exist between government agencies, other organizations and bank partners. Another expert argues that modern customers do not want to transfer their information to the cloud, but want to keep it themselves. The developers took this point into account and offered a worthy alternative. Users have the opportunity to check what is already in the system.
\nThe use of blockchain for legally important document flow is addressed not only by banking institutions. Director of Aronicle LLC Dmitry Ermolaev proposes using the ERA blockchain for concluding contracts, providing bank guarantees, as well as for accounting for bonds and bills. This system was developed taking into account all the legislative features of the Russian Federation.
\nTo enter personal data into EPA, the user must make a transaction from an individual bank account to the account indicated by the witness. In other words, in this case, there is a one-time identification of the candidate at the financial institution. Here they check and collect all the documents that are necessary for this.

Trade and banks

Quite often in modern business a situation arises when a wholesale supplier ships a consignment of goods to its client. However, the buyer cannot always pay for it. In this case, a factoring company can provide money to the supplier (about 90%). It buys the buyer's obligations and provides money immediately after the sale of the goods. The company gives the remaining part (except for the commission) after full payment by the buyer.
\nFactoring is not the only project of Sberbank in trade. The use of technology is part of plans to develop the institution's global trade finance platform. Thanks to this, it will be possible to combine the financing transaction into a single system. At the same time, Sberbank cooperates with all participants: buyers, sellers, as well as with the tax office, customs, and carriers.
\nThe main goal of this platform extends far. It involves creating an ecosystem using the latest blockchain technology. Other banks in the Russian Federation are also involved in the use of blockchain technology in various trade transactions. For example, in December 2016, Alfa-Bank and S7 Airlines conducted the first transaction in the Russian Federation to pay for services provided through a letter of credit using smart contracts (their basis is blockchain technology). The closing period for a letter of credit has been reduced from 5 days to 3 hours. This approach is truly effective, in this case it is possible to optimize costs.

Cryptocurrencies and banks

The Bank of England has created a working group of blockchain experts. They take into account all areas where blockchain technologies and virtual currencies can be used. Notably, this list does not include banks. A couple of years ago, a forecast was made that within a few years a single-tier banking system could be built. In this case, each client opens an account with the Central Bank and all necessary operations are carried out on the blockchain.
\nAt that time, this forecast was not taken seriously enough. A year has passed and the attitude of regulators towards cryptocurrency has changed significantly. In the summer of 2016, the State Duma for the first time discussed the issue of the pros and cons of legalizing cryptocurrencies. Recently, the Deputy Minister of Finance of the Russian Federation said that the authorities are considering the possibility of legalizing transactions with bitcoins, another cryptocurrency, in 2018.
On April 1, 2017, in Japan, bitcoins were equal to ordinary money. In the country they are recognized as a completely legal means of payment. In June 2017, the Singapore administration announced the completion of the first part of the experiment concerning the transfer of the Singapore dollar to the cryptocurrency plane.
\nCryptocurrency is an electronic analogue of traditional money. Its legalization is a serious challenge for modern banks. Leading experts argue that in the next decade there will be no banks left in the form in which they exist today. Market participants will pay each other using cryptocurrency.
\nLending (the most important source of profit for banks) is also under attack. Therefore, modern entrepreneurs have two methods of obtaining funds - direct private investment, as well as a bank loan. Another financing mechanism has recently begun to be used in the world – ICO. This is a cryptocurrency crowdfunding format. The use of ICO can lead to an outflow of banking clients.
\nIt must be said that not all banking specialists are negative. Even if the creators of blockchain systems manage to solve all the existing problems, banks will still have separate niches in the market. After all, a bank is not only about mutual settlements and money transfers. Only banking institutions are capable of accepting funds that belong to one person (individuals or legal entities), and then giving them for use to others on their own behalf.

Does modern business require transparency?

It must be said that there are other ways to use blockchain technology in modern banking institutions. Sberbank has an interesting escrow pilot. In this case, the electronic contract is executed only after the authorization center and all parties have granted permission to carry out the activity. Shareholders, investors, as well as regulators may be interested in applying technology to the banking reporting process. Banks, in turn, will be interested in receiving reports from their clients.
\nCurrently, there are quite attractive projects in leasing, lending, and real estate. The use of technology to confirm bank guarantees looks like a fairly convenient option.
\nThe prospects, all the advantages in this case are obvious. However, real cases of industrial exploitation of the listed technologies have not yet been seen. The introduction of modern blockchain technology into the financial sector is not so easy (not only because of the presence of technical problems). Blockchain in this case implies transparency of various financial transactions. Not all specialists are ready to work without “undesirable” schemes, where all actions are logged.
\nAt the level of pilot projects, developers are making impressive progress. However, when it comes to industrial operation, implementing a new program begins to become more difficult. The problem is not just that the laws are poorly thought out. Distrust of the new, as well as traditional conservatism, is superimposed on the discomfort that causes the inability of employees to hide their own mistakes. Under these conditions, it is quite problematic to expect support from below. Most likely, the regulator is again the main actor.
\nIt is difficult to answer whether blockchain will take root in modern banking and business. However, we still need to decide whether banks will remain in the form in which they exist today. If they want to operate successfully in the market, financial institutions will have to restructure their own work in accordance with all the features of the development of modern technologies. In addition, specialists must fully respond to the new challenges of our time.