Why Russia's CSD Believes Blockchain is a 'Blue Ocean' Opportunity

Movements by the the Depository Trust & Clearing Corporation in the US and the National Settlement Depository in Russia have shown a willingness to use blockchain as a tool to expand and improve CSD operations.

The NSD announced in late April that it had carried out a proof-of-concept for how blockchain could be leveraged for electronic shareholder voting.

According to Yakovlev, blockchain opportunities currently fall into two camps: those that pursue cost reductions and "Blue ocean" opportunities, and those that seek to rethink how the financial industry operates as a whole.

"At the very beginning, we came to conclusion that blockchain cannot provide more operation excellence within existing business processes and inter-company relations without global changes. Blockchain is about business models that cannot be supported using centralized applications paradigm."

According to company representatives, the NSD first began looking into blockchain in April of 2015, an exploration process that was further encouraged as more major financial institutions began to go public with similar tech trials.

Yakovlev said a cross-discipline working body was soon created to unite NSD's business leaders and IT specialists into a dedicated blockchain group, a tactic that is becoming increasingly common at major financial firms.

"The main problem with all e-voting solutions is, first of all, the voter is not able to verify his vote has not been modified before it is processed, or that votes are correctly counted. The transparency of blockchain and its distributed nature allowed us to create a voting process that provides a voter with [the] right tools to address both problems," he continued.

Though it has also elected to implement a private blockchain system, it has done so using technology provided by alternative blockchain community NXT. An early standout of the crypto 2.0 community, NXT was designed as a pure proof-of-stake blockchain, though it has long faced criticisms for perceived centralization problems as they relate to the ownership makeup of its network token.

Votes are then counted and submitted to the blockchain by the NSD, where they would be publicly verifiable.

As far as further blockchain developments at the NSD, for now, the financial firm is focused on completing its voting-oriented pilot.