Russia’s Central Securities Depository, Successfully Tests Blockchain Voting System

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The National Settlement Depository – Russia’s central securities depository – has successfully finished developing and testing an e-proxy voting system running on a distributed ledger (Blockchain technology). The prototype is based on the NXT distributed cryptographic platform, and uses ISO 20022 international standard for messaging. NSD has been working on the project together with DSX Technologies. The project’s open-source code is available on GitHub.

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E-proxy voting is an innovative technology for corporate actions processing that provides for electronic interaction between securities holders and issuers for the purpose of exchanging information and documents.

E-proxy technology was introduced at NSD in August 2014. In April 2015, NSD upgraded the technology, bringing it in line with the global ISO standards. In April 2016, a Blockchain-based prototype of e-proxy voting successfully passed the testing related to bondholder meetings.

Eddie Astanin, Chairman of the Executive Board at NSD, says:

“Over the past 10 years, the global financial infrastructure has faced the challenges that make us review the approaches to reliability, security and performance of information systems. It is obvious for us that ignoring the rapid development of FinTech and upgrading the outdated platforms could hinder the stable development of the Russian financial system. Fortunately, Russian specialists are among the most experienced in the global FinTech industry, and we have proven this fact by implementing a fully functional prototype of e-proxy voting system based on Blockchain. After testing Blockchain for bondholder meetings, we can extend the use of this technology to other business areas of NSD.”

How it Works

The existing e-proxy voting solution enables cascade messaging through a chain of nominee accounts, from the issuer to the securities holder and back. NSD manages the database for the chain, ensuring that all voting instructions are properly submitted and accounted for. The Blockchain-based e-proxy voting prototype enters the instructions into a distributed database which is accessible to all the members of the chain at the same time.

Sergey Putyatinskiy, IT Director at NSD, explains:

“After our work group analyzed the use of Blockchain in several areas of NSD activities, we opted for the automation of the voting process at the annual securities holders meetings. Over the period of four months, we managed to develop a working prototype of the Blockchain-based e-proxy voting system that has no analogues in the world. During the testing process, we reached a submission speed of 80 voting instructions per second. We are currently aiming to increase the system’s capacity and to enable the support of new voting types. Our next step would be to subject our new prototype to legal and cryptographic expert evaluation, which will give us a more definite idea whether the prototype is suited for real voting.”

The distributed database for e-proxy voting contains a full update history, which is protected from tampering by cryptographic security. All the members of the network (nominees and NSD) keep copies of the database, and in case of an inspection, the regulator or the auditor gets full access to all the necessary information simply by joining the network. Once data has been entered into the Blockchain, it cannot be falsified: the system records all changes that have been made in the voting procedure or in the vote results stored in the distributed database. The record is then distributed among all the network members, and can easily be traced.

A securities holder votes via their personal account on the nominee’s website using their digital signature. The nominee then enters the securities holder’s vote into the Blockchain, also accompanying it by a digital signature. To confirm that the vote has been received, the nominee provides the securities holder with the identification number that has been assigned to their vote in the distributed database. Afterwards, the record of the vote is passed on from one nominee to another until it reaches the central securities depository. As the voting is completed, the system calculates the results automatically, and NSD publishes them in the Blockchain, using its digital signature. The use of cryptography ensures the integrity of the voting process during every stage.

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About Richard Kastelein

Founder and publisher of industry publication Blockchain News (EST 2015), a partner at ICO services collective Token.Agency ($750m+ and 90+ ICOs and STOs), director of education company Blockchain Partners (Oracle Partner) – Vancouver native Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of some two dozen Blockchain startups and has written over 1500 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat. Irish Tech News put him in the top 10 Token Architects in Europe.

Kastelein has an Ad Honorem - Honorary Ph.D. and is Chair Professor of Blockchain at China's first Blockchain University in Nanchang at the Jiangxi Ahead Institute of Software and Technology. In 2018 he was invited to and attended University of Oxford's Saïd Business School for Business Automation 4.0 programme.  Over a half a decade experience judging and rewarding some 1000+ innovation projects as an EU expert for the European Commission's SME Instrument programme as a startup assessor and as a startup judge for the UK government's Innovate UK division.

Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London (5x), Manchester, Minsk, Nairobi, Nanchang, Prague, San Mateo, San Francisco, Santa Clara (2x), Shanghai, Singapore (3x), Tel Aviv, Utrecht, Venice, Visakhapatnam, Zwolle and Zurich.

He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and, and his work and ideas have been translated into Dutch, Greek, Polish, German and French. A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world. In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, 'The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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