It's that time again . . . so here's a selection of blockchain-inspired technology providers which may be making a splash in 2017, and also a couple of people doing some nice work with big data and machine learning in finance.
Clearmatics, known for its radical "clearing machines" approach to OTC markets, expects a big year for its Utility Settlement Coin project.
So far Settlement Coin has operated in semi-stealth; an occasional press release filters out, announcing more banks taking part. The project started in 2015 with UBS and Clearmatics, then, in August 2016, BNY Mellon, Deutsche Bank, ICAP and Santander joined.
It's an important project because the goal is to put central bank money on a blockchain. In an ideal world, this could mean extending the core central bank RTGS system with a token backed by central bank assets. It would reduce the need for banks to maintain expensive collateral to meet short-term liquidity needs in real-world currencies.
A release stated: "The utility settlement coin, based on a solution developed by Clearmatics Technologies, aims to let financial institutions pay for securities, such as bonds and equities, without waiting for traditional money transfers to be completed. Instead they would use digital coins that are directly convertible into cash at central banks, cutting the time and cost of post-trade settlement and clearing."
It's a controversial proposal, which sets under a magnifying glass what blockchain actually is. Since 2008, the need for high quality collateral backing the financial system has been largely reliant on government issued bonds, and as such central banks have intensified the capital costs of the clearing system.
Critics question how a blockchain-based parallel clearing system, backed by nothing but computer code can claim to solve a problem which is really about scarcity of safe assets backing trade.
Until more is revealed, this is essentially attacking a straw man. But we have been reliably informed to expect something big early in 2017.
Back in 2014 the team behind Tezos wisely predicted that governance would become something of a problem area for decentralised systems like Bitcoin and Ethereum.
The 2014 white paper describes a self-amending blockchain; in other words a protocol offering a voting procedure for stakeholders to approve amendments to the protocol, including changes to the voting procedure itself.
Tezos founder Arthur Breitman likes to reference Nomic, the game invented by philosopher Peter Suber which includes mechanisms for players to change the rules, usually beginning through a system of democratic voting.
A crowdsale for Tezos tokens will take place in March and a proper network release is planned about a month later.
The team behind blockchain engine Tendermint were busy at DevCon2 in Shanghai announcing Cosmos, which they describe as a network of many independent blockchains called "zones".
Also offering governance capabilities, Tendermint CEO Jae Kwon said the first zone on Cosmos is called the Cosmos Hub, "a multi-asset proof-of-stake cryptocurrency with a simple governance mechanism which enables the network to adapt and upgrade".
The hub and zones of the Cosmos network communicate with each other via an inter-blockchain communication (IBC) protocol, a kind of virtual UDP or TCP for blockchains, he said.
Tokens can be transferred from one zone to another securely and quickly without the need for exchange liquidity between zones. Instead, all inter-zone token transfers go through the Cosmos Hub, which keeps track of the total amount of tokens held by each zone. The hub isolates each zone from the failure of other zones.
Tendermint CTO Ethan Buchman said Cosmos allows interoperability of tokenised blockchains and also upgrades without having to do a hard fork.
innogy / Genesis of Things
The "Genesis of Things" project combines 3D printing, blockchain and IoT in a virtuous, futuristic flow that re-imagines manufacturing processes. The goal is a trusted, encrypted and open platform for the entire 3D printing supply chain.
Each printed product has its own identity and digital product memory and the pertaining intellectual property stays protected on a blockchain, but with capability to scale globally. The innogy Innovation Hub works with platforms like Ethereum and startups like riddle&code, and BigChainDB.
Dr Carsten Stöcker, of Machine Economy Lighthouse innogy SE said next year is all about inflation of new use cases and startups getting involved in "cross-industry collaboration and the quest for consortia or special purpose blockchains".
Parity Technologies (formerly Ethcore) begins production of its Polkadot project next year, to allow diverse kinds of blockchains to interoperate within the same consensus network.
Polkadot has the potential to integrate so-called "private" chains into the same consensus network as public chains like Ethereum, while still retaining their privacy and permissioned safeguards.
Polkadot is to be implemented alongside Melonport, a blockchain infrastructure for investing in crypto portfolios, similar to hedge funds. Melon goes beyond a normal crypto wallet, providing a "rule set" which forces certain elements to portfolios, such as performance calculations and trade restrictions.
Parity Technologies was founded by Dr Gavin Wood, Ethereum co-founder and inventor of the Solidity language, together with other members of Ethereum, like Dr Jutta Steiner, Dr Aeron Buchanan and Kenneth Kappler.
Coloured coins developer Colu is expanding its knowledge and understanding of localised digital currencies across the planet, and specifically in the UK.
Colu, which has been involved in digital money rollouts in Barbados, Brazil and Israel, is now pushing digital "pounds" in London's Camden and in Liverpool. Local digital currencies can be used to seed a new peer-to-peer payment infrastructure and a new digital economy which will benefit local communities as it grows to scale, says the company.
This has become a well-oiled machine comprising merchant tools, wallets, a control panel to manage the new economy, as well as an ops team on the ground. Colu co-founder and CEO Amos Meiri said: "It's about bringing merchants from one side, clients from one side; trade transactions create a marketplace and a local economy."
MultiChain / Coin Sciences
"No one can accuse the banking world of not taking the potential of this technology seriously," states a recent post by MultiChain founder Dr Gideon Greenspan.
Greenspan takes a refreshingly clear view of the fuzzy domain where many blockchain projects have sprung up – situations which would ultimately be better served by a traditional database controlled by a single entity.
In this recent posting, "How to spot a half-baked blockchain", Greenspan sympathises with the many talented people striving to create distributed consensus systems which can tolerate one or more nodes behaving maliciously in unpredictable ways.
"I can certainly understand the temptation to take a shortcut, such as using a single node to generate blocks, or piggybacking on an existing distributed database, or only running nodes in a trusted environment. Choosing any of these undoubtedly makes life easier for developers, even if this undermines the entire point," he says.
Even bigger data
Blockchain hype is rivaled these day by talk of "machine learning", "deep learning", "artificial intelligence" and similar. From a financial perspective, various types of advanced statistical methods have been applied to structured data to detect patterns and make predictions for many decades. The distinction between this sort of mathematical modelling and those ubiquitous machine learning algos is somewhat nuanced and can vary depending on who you ask.
One thing is certain: computing power is getting cheaper and datasets are getting bigger. As a result a whole industry is emerging around data capture, classification and those simply acting as intermediary networks connecting people who are thinking about monetising data (previously considered as a by-product of some core business), and those who may want to buy it (hedge funds and other trading operations looking for an edge).
London-based Neudata does data scouting as an outsourced service for asset managers and hedge funds. According to the firm's founder and CEO Rado Lipuš, business is booming. He mentioned his newest client, a family office involved in global trade and logistics, which has now been happily connected to his network of data-hungry hedge funds. Another company in New York he deals with is selling monthly subscriptions to its data at $20,000 a pop and has signed up 30 hedge funds in the past year.
A cool company that provides interesting datasets to over 100,000 users working in finance is Quandl. Founder Tammer Kamel points out that there are some really big, hairy datasets out there which Wall Street would love to get its hands on, but so far hasn't worked out a way to do it.
There are lots of examples, but one hot area is Internet of Things (IoT) data. For instance, in the Midwest many farms have smart tractors or sensors in the ground feeding back data about the quality of their soil so fertiliser can be administered. Aggregated together, this large dataset could provide predictions about potential yields for the entire corn growing Midwest – which of course Wall Street investors would love to know about.
"It's a beautiful IoT data set, but extracting the value is a challenge," says Kamel.