Wealth managers are looking to diversify their portfolios with digital assets.

Introduction: preparing the pre-bull market

The 4 things to take care to make your business or a bank blockchain ready

The concept of Interoperability

How Much is Chain Interoperability Worth?

What is inside DCRM

How does Fusion’s DCRM works?

Comparison Table

Advantages of DCRM

Conclusion

Intro: Are you surprised by the recent increase in Bitcoin price, I am not!

An increasing number of wealth managers are looking to diversify their portfolios with digital assets such as cryptocurrencies, security and utility tokens and tokenized investment vehicles. However, security and convenience are still major barriers for sophisticated and traditional investors. Is the ecosystem ready for banks and portfolio managers to offer crypto assets to their clients? What are the challenges of integrating this new asset class within the traditional wealth management portfolio? How can we overcome these challenges?

Hello everyone, my name is Karim Chaϊb technology leader, XDLT founder and Fusion Chief Crypto Officer and I like to get things done! In 2017 I decided to push a world leading banking software provider with 4 Trillions Assets Under Management located in Switzerland to the journey of supporting digital assets. My core motivation was the simple idea that for crypto mass adoption, people needed to have an easy access to cryptocurrencies and digital assets. Bank clients should not have to withdraw their money to buy and store tokens in some risky foreign crypto-exchanges. The solution we built enables clients to simply use their own e-banking or call their wealth manager to buy and sell cryptocurrencies.

In this article, we explore the latest developments in the crypto assets space and the technological advancements that enable institutional and sophisticated investors and even your own business to participate in the new opportunities presented by the tokenized economy.

The 4 requirements to make your business blockchain ready :

1. Custody solution (where and how to store your crypto assets): Perhaps the most important component of holding digital assets is determining how to store and protect your private keys. Ask yourself where you would store your private keys or the private keys that belong to your customers? Who has access this storage facility? tackle this point first and review the various crypto HSM provider offering carefully.

2. Legal framework and architecture: During my time working with many crypto projects, I have engaged numerous lawyers specialized in the digital asset law and found out the following:

A. Keep the private key of your clients segregated (no omnibus account) to increase security and minimize the responsibility of the bank. Moreover in this way, those assets would not appear in the Bank balance sheet.

B. Custody provider must support all and any forks as this represents value to the client.

C. Regulators force Anti-Money-Laundering (AML) on crypto wallet to be performed on each transactions.

3. Market Validation:

In June 2018 I did the first prototype and prepared a demo at our yearly conference, when our clients noticed that they could also support crypto currencies natively. In 1 week several big banks were lined up and ready to start a pilot, in fact digital asset is the way for banks to distinguish their all identical services and attract new generation of clients (generation X, Y, Z). Furthermore studies showed that younger generation are more inclined to purchase cryptocurrency than invest in traditional shares.

So if you ask me if I’m personally bullish on the price of crypto. 2018 and 2019 were bearish years for most people, nevertheless what few people know, is it has been the years where the smart money was invested by banks to build the technical system to support cryptocurrencies, and more broadly digital assets. The products soon to hit the market will be sponsored by the banks directly, including bank backed cryptocurrency debit cards, STOs and even ICOs. This provides clients with a more formal way of entering the cryptocurrency market as opposed to dealing with the oftentimes shady ICO environment of 2017/2018. This also provides local corporate customers with another avenue to raise money and ultimately increase their Assets Under Management (AUM). The race between banks is on how much crypto assets they are able to support so they can provide their clients the greatest amount of choice.

4. Implementation: During the architectural phase we found out 2 big challenges:

Where to get crypto AML, settlement information, and access all transactions from any blockchains simply with SQL or API calls?

(short answer I founded XDLT)

(short answer I founded XDLT) How to integrate all this different blockchains and cryptocurrencies (more than 2000) efficiently? (short answer I joined the Fusion Foundation)

Indeed I was looking to identify in the market an easy solution allows us to integrate all this distributed ledgers technologies within just one blockchain. The inability for isolated blockchains to communicate with one another is a recurring problem in the decentralized landscape. Isolated inter-blockchain communication can put a strain to blockchain’s scalability and mainstream adoption.

The concept of Interoperability — Compatibility VS Interoperability.

Interoperability is the concept of connecting otherwise siloed blockchains to enable seamless interaction across different systems. This facilitates the development of decentralized applications that can interoperate with more cross-chain and enable the unrestricted transfer of value and Logic in a decentralized and trustless way.

In the blockchain landscape there are 2 concepts that are mistakenly associated Compatibility VS Interoperability. Compatibility implies setting a standard and forcing industry participants to adopt that standard, reducing flexibility and requiring a rigid model for every solution. I was searching for something better, it was obvious to me that I wanted a cryptographic interoperability solution that didn’t force conformity.

Compatibility: Notary schemes, Relays (Sidechains/relays) and Hash-locking.

Notary schemes: In this system, a trusted entity or group is used in order to claim that a given event on a sub-chain has taken place or that some claim is true. These may be actively listening and automatically acting based on events on a given chain or passively issuing signed messages only when prompted.

Relays: This requires independently verifying the block header that contains the transactions important to it’s use. This needs verifying all branches of the Merkle tree within that block, the time between transactions is directly dependent on the block time associated with each chain with the “worst possible” scenario time-to-verify for the cross-chain transaction.

Hashlocking: Relatively simple and limited in their capability, this is one method for achieving atomic swaps. It does this by having both users locking their funds in a smart contract that only releases after the first user provides the key which unlocks both.

Projects in the compatibility category: Polkadot, Cosmos, Interledger protocol, BTC Relay, Lightning Network HTLC hash locking technology, AION, ICON, Block Collider, Ark, Holochain, Atomic Swaps, Komodos, Blocknet, Lamden, Metronome, Quant Network, Dragonchain, Auxledger, EXRN, EOS

Projects in the cryptographic interoperability (true interoperability) Fusion with distributed private key control (DCRM), and Wanchain,

I was searching for a solution that is able to manage any kind of blockchain without having to impose a strict standard to any of the underlying ledgers or to have to trust some third part provider. In February 2018 only 2 projects were moving in this direction, Fusion and Wanchain, using different models of distributed private key sharding to achieve blockchain interconnectivity.

Within the past 6 months, the Fusion project has distinguished itself by advancing their cryptographic research and validating their highly innovative interoperability solution known as DCRM. The strength of their core technical team and their ability to gather the best cryptographers in the world (Paillier, Gennaro, Goldfeder, Goubin) to work on DCRM is a major credit. Fusion are in the final stages of validating a truly new and unique way to manage private keys without compromising decentralization.