Fundchain, the Luxembourg-based Blockchain consortium initiated during the summer of 2016, is now ready to unveil its first outcomes following 6 months of collaborative work and a hackathon to push the project over the line to a PoC.
After several workshop sessions, the group decided to initially focus its research on the fund distribution value chain. The aim was to introduce an easy to replicate Proof-of-Concept to the fund ecosystem.
With the support of the University of Luxembourg, almost 80 people from every participating organization, came together to finalize the prototype during a 2-day hackathon. The event mixed fund industry professionals with business and technical backgrounds with Blockchain academic researchers and Blockchain specialists from Scorechain. For 2 days, business and technical teams worked alongside to finalize the ready-to-use PoC.
For Laurent Kratz, Scorechain co-founder:
“It’s exciting to see how this initiative built up a real synergy between major financial institutions, not only with Scorechain but also between all of them. What is also promising, is that the group is always improving the PoC with the use of our collaborative platform.”
The fully decentralized Smart TA finally unveiled internally, is running on an Ethereum private Blockchain.
The collaborative and inclusive approach to the Hackathon, led to the presentation of the Smart TA prototype.
Overcoming the main challenge of replicating the fund distribution value chain specifications through a Distributed Ledger Technology (DLT) infrastructure, the Smart TA is a Blockchain-based platform enabling digital share transactions. Different roles were assigned to connect and act within the private Blockchain.
An investor has access to Fundstore, while an asset manager, or fund administrator can interact with the subscription process.
The Smart TA prototype shows how the DLT can facilitate and automate procedures while reducing operational inefficiencies and errors. Interactions between intermediaries are decentralized, faster, and more transparent.
Ethereum (the selected technology), has been turned into a private Blockchain. In this peer-to-peer environment, each user connects via their unique Blockchain node for real-time synchronization between all members.
This approach proves the technology is operational and ready to target the fund industry’s needs. Fundchain’s efforts may be considered as a major step forward for the Luxembourg investment fund ecosystem, especially now that market leaders agree that DLT is an opportunity to confirm the country’s leading position in Europe.
The next step will be to assess the regulatory challenges of the Smart TA business model. Fundchain intends on presenting the Smart TA over the coming weeks to the regulator.
The Fundchain initiative was launched in the summer with 10 key market players of the fund industry — BIL, BNP Paribas Securities Services, CACEIS, European Fund Administration (EFA), HSBC, ING Luxembourg, Pictet, RBC Investor & Treasury Services, Société Générale Bank & Trust, and Professional Services firm PwC Luxembourg —, the University of Luxembourg (SnT) and the Blockchain startup Scorechain.
The aim is to develop solutions using Distributed Ledger Technology and smart-contracts to act as innovation pioneers for the fund distribution value chain in Luxembourg.