Sergey Nazarov in the past spoke about how smart contracts influence the asset management industry, and how they will act as a single superior source of truth. And, on how those acting as a single source of truth begin to change the structure of the global financial market, how that change in structure will influence the asset management industry in its ability to manage risk to assets, gain access to new assets and reduce operational costs and fees.
Sergey Nazarov, CEO of Chainlink tweeted: “It seems likely DeFi will be adopted by existing financial institutions as a new financial product. Starting with access to Bitcoin needing custody solutions, evolving into the need for a blockchain abstraction layer to interact with DeFi smart contracts.”
A smart contract consists of a code running on a network of computer sets beyond the control of any one party, private key holders, which sign approving certain transactions and also oracles that essentially input data in to those contracts at a very high level of security and reliability.
We work primarily on the oracles in enabling the interaction between the contract and both the external data and enterprise system. But before we jump in to some of the more interesting details about technical aspects of that works I think it will be more useful to create more shared contracts about why this is significant for the asset management industry.
It helps to understand certain categories of assets. They are large categories, billions, sometimes trillions worth of assets and them how those categories function. I think what you would basically see is a lot of fragmentation.
Sydney Ifergan, the crypto expert tweeted: “ChainLink (LINK) Sergey Nazarov has established the importance of the single source of truth fairly well, thus serving as a key to breaking monopoly which creates financial inefficiencies.”
ChainLink (LINK) Sergey Nazarov on Single Source of Truth
You see huge fragmentation of siloes of data in the individual institutions participating in the asset transactions. There will be middlemen or technology companies that seek to impose standards so that they want to make a standard of some kind, API standard of some kind, and if they are not member owned, then they see to eventually establish profit extraction of monopoly right.
This increases both the complexity for the internal risk assessment and management of assets which increases the costs, which are then passed over to your users, but even beyond all that, you have a world right now, where everybody have their own database, there is a few software providers that sit between asset managers and issuers of the asset and another party and it is hugely inefficient. It creates systemic financial risks, it creates huge amounts of costs for the asset managers actually, and the asset manager has massive purchasing power.
So the asset manager has the ability to impose certain structural changes on the market by virtue of purchasing power alone. And, I think one of the things that I wanted to talk to is why you would want to impose certain structural changes added by somebody with purchasing power because it benefits you as a main asset manager and not an asset issuer.
Single source of truth is the value proposition. The outcome that blockchain seek to deliver. And, they deliver these different things in different markets. In supply chains, they are delivered in one way in financial markets in another way. In insurance markets there is a third way in which a single source of truth is providing basically transparency about what is going on with an asset.
And, the ability to continue the update of single record. If you don’t have a single record that all the parties can access, then everybody are keeping their own record, and my record as the information that your record does not have, now I have to get it to you, but I might not be able to get it to you, I can get it to you, but you don’t have that format.
However, if we have a single source of truth that we all trust. We can all appendage with additional useful information. And, it is appending of additional useful information to a single shared source of truth often called as the golden source of truth which is what blockchain seeks to achieve.
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