Unchained - Why Nasdaq Is Even More Optimistic About Blockchain Than It Was 3 Years Ago

Episode Date: February 21, 2017

Fredrik Voss, Nasdaq's head of blockchain initiatives, discusses what the company has accomplished with the technology and how his firm evaluates whether potential projects could benefit from a blockchain solution. He also reveals what is likely to really slow adoption of distributed ledgers (hint: not the tech itself) and gives advice to other companies looking to incorporate it. Read the show notes and my magazine story on Chain and its work with Nasdaq.  This episode was sponsored by Onramp. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, a podcast engineered by Fractal Recording and produced by me, your host, Laura Shin, a Forbes contributor covering blockchain, cryptocurrencies, and fintech. Thanks for tuning in. If you've been enjoying this podcast, I would so appreciate it if you would rate, review, and subscribe to Unchained on iTunes or wherever you get your podcasts. Those ratings and reviews help others find the show. I'd also like to extend a big thank you to our sponsor, OnRamp. Branding isn't just a logo. Your brand is the essence of who you are and what you offer your customers. OnRamp is a full-service creative and design agency that provides its clients with concise and exceptionally designed branding, websites, and marketing materials that will resonate with your audience, affect its purchase decisions, and ultimately grow your business. You can learn more at thinkonRamp.com.

My guest today is Frederick Voss, vice president of blockchain innovation at NASDAQ, one of of the leaders among financial services companies working on incorporating blockchain technology into their products. Nasdaq was the first incumbent to launch a blockchain-based product, NASDAQ, which is used to manage shares in private companies. It has also launched an effort in Estonia to create an electronic shareholder voting system that uses blockchain technology. And last year, the company unveiled a financial framework for clients who want to incorporate blockchain and to their products and services. Welcome, Frederick. Thank you, Laura, and thanks for having me. So tell us what you do at NASDAQ. Yeah, so my contribution to NASDAQ's blockchain innovation

project is I work with the C-suite on what our corporate objectives should be across the entire NASDAQ proposing strategies for achieving those objectives. And I do also get involved if we have, you know, investment opportunities in the space. Okay, such as, for example, one that I know of is an investment that you made in chain, which is also your partner. Absolutely, that's correct. And what are some others that NASDAQ has made? Well, actually, in the blockchain space, chain is so far.

I think there will be more, but so far our only investment in sort of parallel financial innovation. tracks that we're working on like machine intelligence, we have done other investments, for example, in a company called Digital Reasoning. But in blockchain so far, it's been chain. And what was your background before this role? My background is really in the commodity derivatives space. I've been involved in exchange and clearinghouse operations for commodity derivatives since the mid-90s, actually. And how did you end up learning about blockchain technology? Yeah, so my previous role as co-heading our European commodities business,

I've had that role for six years, and it was sort of time to do something else. And at that stage, this was early 2015, NASDAQ was looking to expand its blockchain innovation initiative and was looking for a person with some commercial background in the space, in the capital market space. And, you know, I got the question if I was interested in the role, and that's the way it went. And had you heard about Bitcoin or other cryptocurrencies or blockchain generally when they approached you about that? Yeah, I've heard about Bitcoin. I cannot say I knew a lot about it, and particularly I wasn't familiar with sort of the technology upon which Bitcoin operated. So that was new to me.

me actually when I took up the role almost two years ago. And why did other, you know, other than wanting a change of, I guess a change in your work, why did you decide to take the role? Well, I've always been interested in intrigued by the way capital markets functions. So, you know, aspects of liquidity, market structure, capital markets for the good of society and reform and change of capital markets. I've, for example, been involved in various projects, closing trading floors, going electronic instead.

And I found it intriguing that while the front end, the trading part of capital markets have gone through a fantastic amount of innovation over the last, let's say, 20 years or more, the post-trade part is very much unchanged. And this is a technology that has the potential to, be contributed to a reform and enhancement on that part of capital and financial market. So that was intriguing to me. So let's talk about NASDAQ's main blockchain initiatives.

I briefly described them at the beginning of the call, but can you go into more detail around what they are? Yeah, I mean, first of all, there are three areas that are of interest to us when we think about blockchain and capital markets. That is not because those three are exclusively interesting, but they are the ones where we have started and that are keen interest to us.

And they are, you know, as I mentioned, the post-trade plumbing on capital markets. It's regulatory transparency. It's the relationship between issuers of an asset and the investor of the asset. And when we look at our projects, ideas, initiatives,

POCs, etc., we typically sort of validate them against those three buckets of interest. And we have a pretty large portfolio, actually, of projects. So far, we only publicly announced two of them. And, you know, as you mentioned, the private company link solution and the the voting project in Estonia. But we do have other projects initiatives that we're working on as well.

Some are very, you know, R&D laboratory oriented, and they will probably never be announced and some are more commercial in nature and we will, you know, see if some point we'll go public with them. Okay, well, let's dive into some detail on Link, for instance. How would you say, how does that work? Yeah, no, I think you can't really conclude on that yet. It is still a solution in evolution. We are looking to expand the capabilities of the Link solution in actually in many dimensions, we're looking to expand the user base, we are looking to expand the feature set, possibly geographically as well. So it's by no means a done deal. But actually, can you just start with what it is, you know, how it works, like what the product is?

Yeah, so it is a blockchain-based solution that allows a private company to issue shares, transfer those shares to its investors. And if there is secondary market, trade, transfer of those shares between the investors. And the intriguing part is that this is done electronically using blockchain technology and with no trusted third party like a depository in the middle. So it's an electronic version of the current sort of peer-to-peer basis upon which that market operates. So it really not only validates the technology, it actually validates the alternative market

structure of transfer of ownership of business. digital shares in a peer-to-peer network. And that's sort of the key part of the link initiative as it stands right now. And how does it compare to previous systems for managing those types of services? I mean, and this varies, of course, from country to country and market to market, but if we talk about the U.S. market, that historically has been basically paper-based. when a private company issue shares, it typically does that in a paper certificate. Those paper certificates are then transferred to investors in those companies and then between investors if there is a secondary market trade.

So this is making that market more efficient, making it more electronic, less prone to errors. And of course, in other markets around the world, even private shares, sort of electronic and decertified. But in those markets, you typically have a trusted sort of database in the middle, a depository or a registry. And of course, Link demonstrates that you don't have to have that. You can continue to operate this on a peer-to-peer network basis. And so in terms of the ways that blockchain, in this case,

improves upon the existing software, is that it probably eliminates some of the problems that you might have with a paper-based system, such as if, let's say, an investor or an employee receives more shares in the company or something like that, then, you know, you don't have sort of like these invalid previous paper certificates that are floating around or, you know, or in just the fact that you don't have to deal with paper in general means that it's just much more efficient. Is that a correct characterization? That is a very accurate characterization.

Basically, it helps the company to better keep track of its capitalization table, basically who owns what in the company. You will see much fewer errors. You will also see faster processing of these transactions. So it is both reducing errors, but actually enhancing, you know, let's call it operational productivity in that ecosystem. And what about the electronic shareholder voting system? How does that work?

Yeah, so the technology stack is very similar. We leverage the chain core blockchain ledger protocol for both these cases. We do have a middleware, the financial framework that you alluded to. And then we've built some unique applications in each of these cases. So the applications for the voting solution looks a bit. different from the applications for the private company application. But so the technology stack is very similar. In the voting case, it is a slightly different use case, of course,

in that the key things we wanted to verify there was, you know, we wanted to force ourselves to work with the issue of identity. How do you identify a person on the blockchain? How do you identify a person representing a company? how do you work with delegation of rights on the blockchain if you want to delegate your voting right from yourself to a proxy for example and so we wanted to challenge ourselves on on a different with some different challenges in in the voting case and you know that's why we took on that specific project and so in general for this electronic shareholder voting system

What problems exist in the current method that you feel blockchain can resolve? I mean, first of all, this implementation allows the companies in Estonia to participate remotely in the AGMs, for example, in the shareholder meetings, which hasn't been possible before. but more importantly, it allows the casting of votes remotely as well, and it allows the delegation of those votes. So if you own shares in the company, you will be given basically blockchain-based tokens equalling to the number of shares you own. But then you can transfer those on the network,

and you can, for example, give them to me and I can vote on your behalf. And because of the strong capabilities of blockchain technology to keep track of, you know, provenance of a digitized asset, in this case a vote. We can follow the whereabouts of these votes. And one problem that solves is, for example, if you're a proxy today, it is very difficult to demonstrate to the person who delegated its votes to you that you actually voted in accordance with the instructions. If you leverage the foundational capabilities of blockchain technology, that is very easy.

You can basically see that the voting token was cast in either the yes or the no ballot. And that is also a problem that the technology helps solving in a very good way. In both these cases, NASDAQ link as well as the electronic shareholder voting system, what would you say is the benefit of using blockchain here? Like how did you decide to use blockchain as a solution to improve these systems as opposed to some other technology? I mean, first of all, when we set out on these projects and they were both started in, I think, 2015 or early 2016,

the key objective of these projects was actually learning. We wanted to acquire learning on the technology, but also around legal and regulatory aspects, also around business model questions and about integration and transition questions. The key objectives for us were actually learning. They were in that early stage, not intended to be, you know, sort of highly profitable products.

As we now are three years down the line of our blockchain project, we're sort of shifting the objective somewhat. It is going to be less about learning and actually more about, you know, genuine commercialization going forward. And that also means that we will sort of a little bit tweak the nature of our our project and become more focused on on the satisfying needs that clients in these use cases are willing to, you know, pay for us to sort of solve their problems. And aside from the commercialization aspect, how else do you evaluate whether a product

or service could benefit from blockchain? Because you hear a lot of kind of joking in the industry, or I think there have even been comics that have gone around that have, you know, said like, oh, you have this problem, let's put a blockchain on it. And, you know, there's this perception that everybody thinks now that it's going to solve everything when, of course, that's not the case. So, you know, aside from just like business model considerations, how do you figure out whether or not a certain problem or service is actually going to be improved by blockchain? Yeah, I mean, first of all, I think it is worth putting it into context on our overall innovation portfolio.

and sort of our long use of technologies for solving problems in capital and financial markets. And, you know, we use and investigate machine intelligence. We work with cloud computers. We work with cloud computing with augmented reality, cryptography in general. So we don't think that we have a hammer here, a blockchain hammer, and everything that we see is nails. we think we can be pretty focused and selective on the uses of the relevant technology for the relevant problem. But it all goes back to the problem and the market need that we're trying to solve and identifying, you know,

does that problem lend itself to a peer-to-peer structure, for example? Does it have the need for, you know, provenance in the workflow? for example, that it's important that you keep track of where the asset has been throughout its life history, which is very important, for example, in a private company example. And when we are satisfied that, you know, we understand what is the need here, what does a good market structure look like? What does the good market business model look like? And then we sort of map them across all our available technologies. and if we see that, well, for this particular case, you know, the blockchain-based solution

seems to be the best fit. That is when we, that's when we try to sort of, you know, deploy that technology. We're not trying to sort of bend the problem to fit the technology because we have a very broad toolbox of many different technologies and we're trying to find the best fit for the problem. And when we see that, you know, a distributed ledger infrastructure is what this problem needs to solve. That is when we're looking to use it. And I like, you know, how you are thinking about this in terms of this much broader toolbox of technologies. And yet I know also that you launched this financial framework that enables companies to use blockchain in many different ways.

So can you first describe what the financial framework is? Yeah, the financial framework is a framework that allows, strategically, it allows the user to future-proof its technical roadmap. So it allows you to combine different kinds of data stores. It, for example, allows you to combine a blockchain with a traditional database. It allows you to combine different kinds of blockchain. it allows you to move from one data store to another. So maybe today you want to use the traditional database with a traditional market model,

but you may want to move to a new model and a distributed ledger database. And then the way this all fits together on a modular basis allows you to do those changes and do those sort of transfers from one technology to another without you're having to change. you're having to change the whole stack. You can basically keep your application layer constant.

And vice versa, if you want to move your applications or change your applications for various reasons, you know, you want to change the collateral management application or a settlement application or payment application, you can swap those out without having to change the underlying data store. So it is a modular framework that allows a company to, as I said, future proofs. technical roadmap for the future by having this modular structure. With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between.

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Medcan. Live well for life. Visit medcan.com slash moments to get started. So I am not familiar enough with the technology, at least, you know, kind of like in this sort of deep back-end way to fully understand exactly what some of this means in terms of future-proofing. But can you walk me through, like you gave some examples of different types of services that companies might offer where they might use this framework like you mentioned collateral management or payments.

What would be an example of, you know, how a client might use this financial framework? Yeah. So it can actually be used by almost any type of capital market. I think what is closest to us is, of course, our supply of solutions to exchanges, to clearinghouses, to depositories for market surveillance purposes, for, you know, regulatory transparency. So if you are a central depository, for example, this will allow you to use this framework, maybe unchanged today, but as the technology evolves, as your business evolve, it will allow you to continue to adapt and transform your business models

without having to do significant changes to your technology, even as your business changes. And I think that is the key value of the NASDAQ financial framework. Then, of course, if you're a broker, you could possibly use it as well, or if you're a bank, I can see use cases for it as well. But, you know, NASDAQ's background has been in sort of exchange and CCP business, and I think that's where it sort of starts in terms of the use of the technology. And what makes this possible?

Is it blockchain technology? No, I mean, it is integrated with blockchain technology, and blockchain technology is a potential key component of it, but it is technology independent. you can use it with blockchain technology or you can use it with traditional databases as well and that is what makes it so flexible that it's not tied to a particular kind of data storage

and also it is not sort of tied to any particular applications either. So it's a framework for capital markets use that allows the user to be sort of flexible in its use of it. now and for the future. And who is currently using it? Yeah, so this is something we announced earlier this year. We actually use it for our Estonia initiative on the voting side. Our technology business that sell and provide solutions to our clients around the world

are in discussion with a couple of clients about the use of it. But it's a relatively new framework that we are continuously enhancing, that we are, you know, looking to, you know, increasingly deploy over the coming years. And is the business model for that software as a service? You can deploy the NASDAQ financial framework either in your own data centers, but it can also be deployed in a cloud, definitely. Well, that's a great thought. I just want to pause things right here to bring in an important word from our sponsor, OnRamp.

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I'm speaking with Frederick Voss, vice president of blockchain innovation at NASDAQ. So we briefly touched on this, but now that we have kind of a bigger overview of what you are doing at NASDAQ, how would you characterize NASDAQ's overall blockchain strategy? Yeah, so I mentioned the three areas that are key interest to us, post-rate plumbing, regulatory transparency, and relationship between an issue of an asset and the holder of that asset. And to sort of serve those areas, our strategy is basically based upon we develop applications that leverage the inherent capabilities of distributed ledger protocols. We actually don't develop those protocols ourselves.

We've been working and are working closely with Jane as a protocol provider to us. We leverage the fact that we are both a technology supplier to capital markets around the world, but we're also a service provider. You know, we run our own exchanges, our own clearinghouses, our own depositories, and that sort of gives us a unique insight in how these markets could potentially use the technology. So I think our strategic approach is one of, you know, developing and having a history of developing high quality applications to these markets and actually leveraging the fact that we use those products ourselves. and that gives sort of a unique insight and understanding and capabilities of observing the needs of capital market service providers, basically regardless of technology, but it's definitely very helpful when you're embarking on looking at a new kind of technology like blockchain technology. How do you see this technology helping the requirements you have for showing certain transactions to regulators?

Well, one of the strengths of the blockchain technologies, of course, it's very, very good at keeping track of possession of a digitized asset, especially in a peer-to-peer network environment. And of course, with the technology, we think it's possible that you give a sort of like a special set of goggles to regulators. You know, you can give them a special kind of node in the blockchain ledger networks that allows them to basically see what's going on. on a broader scale and with more transparency than today. And that is, of course, helpful. That could potentially allow regulators to faster and in more detail see where you have potentially concentration risks in a market ecosystem or systemic risks involving in a market.

Now, of course, this all remains to be proven, but it looks to us like the technology could potentially have a lot to offer on that front. And you mentioned earlier that things have evolved for NASDAQ in terms of the way that it's approaching blockchain, you know, three years ago as opposed to now. What were the company's thoughts back then around what the technology would mean for NASDAQ? I mean, NASDAQ as being a technology company in the financial space for over 20 years.

I mean, you know, as I said, we investigate and explore all kinds of new technologies. So for us, you know, blockchain is more of an ordinary workday than Christmas morning. So we take upon us for, you know, the benefit of our clients, ourselves, and actually we owe our shareholders to understand and explore our technologies. And I think the common theme, all new technologies, I think the common theme for all of this is the quest for increased productivity, increased efficiencies, but also new potentially new business models and new alternative market structures. And three years ago, it was an idea, it was a desire to better understand the potential of the technology in capital markets.

And now we see that there is good hope that the technology has, a potential in the future for a larger scale adoption in capital markets. So our understanding is better. We understand that there is a long way to go before we see a very wide-scale adoption of the technology in capital markets. But we think now, it looks more promising now than we thought three years ago. I think it's a good way of characterizing the situation. Oh, wow.

Well, that's interesting to me because. As I mentioned, the cartoon where every solution, the joke is that every solution can, every solution can be applied through a blockchain. But because of that sort of like derisive attitude that people are abusing it or, you know, or don't know what to do with it or overusing it, I'm actually surprised to hear that you are more optimistic about the potential. What do you feel like you've learned over the last three years? I mean, first of all, it won't be useful for all kinds of problems and all kinds of market structures.

But we certainly see that there are cases and situations where a technology that is strong on keeping track of ownership of digital securities on a peer-to-peer basis could play a significant role, I think. But ultimately, this comes down to the market participants and the choice of their market structure. So today, many markets are using a trusted third party in the middle. like a CCP or a CSD, you know, they are happy with that. And one should not try to squeeze in a technology that is not fit for that purpose. But on the other hand, we see markets like, for example, the private company market in the US, that lends itself very well to this kind of structure. It actually already has that kind of structure,

but a blockchain-based solution could be superior to the technology that is currently at hand. So we think it has the role to play, but not for every kind of problem. I think I want to sort of nuance that reply a little bit. But why are you more optimistic now than you were even three years ago? Yeah, first of all, I think it's because of a general better understanding. And of course, the technology evolves. We see that the protocols that are being worked on, how they evolve, in a constructive and positive way.

Some of the problems that were identified with the technology, so many of them remains to be solved, but it looks promising that they could be solved. I think we also have a better understanding of the, you know, how does the, how does solutions built on this technology fit into legal and regulatory framework? So it's a better understanding of the technology and it's a better understanding of the potential role it could play,

and therefore it looks to us like it could have a role to play on capital markets in the future. And when you say that there are still ways that the technology needs to evolve or develop in order to really be useful in all the ways that you can imagine, what are some of those things that you feel still need to happen? It's still very much sort of a hope and a belief, Many of these things remains to be proven in production and on a large scale. So you, of course, have issues around performance, scalability, security, how it fits into legal and regulatory frameworks, for example. So it is more about battle testing the technology and figuring out and identifying what works well, what doesn't work so well, what needs to be changed.

you know, a couple of these issues are already being addressed. I mean, if we talk about performance, we talk about scalability, what's available now is much more performance and scalable protocols than we had like only two years ago. So we see how things evolve. We understand that there still needs to be work that needs to be done, but it looks quite promising to us. So as you mentioned at the beginning of the call, chain has been your partner for much of your blockchain work.

Why did you choose chain and how does the division of labor breakdown between the two companies when you collaborate on something together? Yeah, no, we think they're a great team, first and foremost. They have great technology. And that's, of course, two key parameters when choosing a partner. In our joint products, of course, we come with a vast experience of building. applications for use in capital markets. So we contribute that. They are very good on the distributed ledger technology part. They have a great protocol. And when we sort of sit down together and work on our joint projects, you know, I think we help them understand how that technology fits in

capital market and they'll help us to provide a high-performing ledgy protocol for what we need going forward for our for Link for example and for Estonia and for some of the other projects we are working on. So I think that's a very constructive match that we have with the guys of Link at Chain, I mean. Yeah, when you talked about how you think they're a great team. I actually also had Adam Ludwin, the CEO of Chain on the podcast earlier and he's always a very kind of insightful person to talk with about this technology. So something that's interesting to me is that I had spoken to you earlier and you talked with me a little bit about some of like the more mundane aspects of adopting this technology that are just important to consider like from a

practical perspective. Can you talk a little bit about that? You know, like when you really get down to the nuts and bolts of trying to incorporate blockchain into an existing product or service, what are some of the obstacles that you come up against? First of all, we talked about that a couple of minutes ago about, you know, technology, the technology is not the finished product, so that will, of course, evolve over time. But actually, when we consider what are the bigger challenges to the adoption of the technology in capital markets on a large scale, we think that the technology will evolve faster than some of these other, how some of these other mundane aspects will be addressed. And one area I touched

upon, and that is, of course, the legal and regulatory landscape. Many of these new alternative market models and ideas and proposals for products and solutions that emanate from blockchain technology, they are so innovative that they are simply not contemplated by existing laws and regulation. So the issue is not so much that regulation prohibiting these new ideas. It is more that they were not contemplated and therefore you have a legal void and legal uncertainty. And when you have legal uncertainty, it is difficult for market participants to allocate a lot of assets to those kinds of solutions. So in parallel to technical innovation, we think there is in many areas and need for legal and regulatory innovation. And that is, of course, not a showstopper.

You know, we change laws and regulations all the time, but it has an impact on the timeline because it's, you know, it's labor-intensive work that needs some time to happen. So that's one example. Another one is, you know, going from vision to blueprints and the implementation of those blueprints is also not. not a showstopper, but it's time-consuming and has an impact on the timeline. I mean, we all hear about faster settlement, less need for collateral, cheaper solution. So I think there is a common, there is a lot of people that subscribe to the visions of what can blockchain bring, but you need to go from those visions to a blueprint of how do you want it to work.

And many of the benefits of the technology is relying upon there being a network, an ecosystem or markets participating, adopting these new solutions based on the technology. But then you need to find an agreement across these parties of how do you actually want it to work. Yeah, we may have faster settlement, but how fast? Are we talking T plus zero? Are we talking T plus a couple of hours? Or are we talking optional settlement speeds? And just take one example of one aspect that needs to be agreed upon.

And agreeing on these blueprints also will take some time and impact the timeline by which we see this technology being adopted. And thirdly, any implementation of an adoption of a new technology doesn't happen in a vacuum. I mean, it needs to fit into an ecosystem of already existing infrastructure. So there is a need for integration of the technology. And again, we do integrate the capital market participants do integrate new technologies and systems all the time. But it takes, you know, it is work and it takes time. And also, of course, if we're talking about replacing all technology, there also needs to be credible transition plans in place before the market embarks on these big transitions.

You want to know that you are looking at a potentially successful transition before you invest. in a new technology. So I think those three areas, legal regulation, from vision to blueprint, and integration and transitions are three examples of sort of non-technical aspects that will be critical before we see the implementation of the technology on a large scale in existing capital markets. And can you walk me through what that would look like applied to, for instance, NASDAQ, market, you know, how long do you think it would take? Because as far as I understand, there's currently five clients there using the blockchain-based solution, and then all the others are still on the previous version of the software that you had. So what are all the steps that need to happen

in order to get everybody on board with Link? Yeah. So, I mean, first of all, if for the sake of argument saying that we are right in what are the challenges to the wide-scale? adoption of the technology. Then, of course, we think that the commercial opportunities in the early stages will be those where you don't have a lot of those challenges. So we think that the early commercial opportunities will be in sort of regulatory light environments and in markets with relatively low technical complexity. And that is actually one of the reasons why we picked the private market as one of our first markets. It is actually a lower level of legal and regulatory complexity than if you're talking about

public markets, for example, and also the level of technical sophistication in that market is relatively low compared to, again, to, for example, publicly listed market. So for some opportunities, these three Monday. obstacles to adoption are less prevalent. And of course, in those markets, we think we will see an earlier adoption of the technology, like, for example, in the private market. But that will serve as a great test bed and data point for decisions on whether to deploy the technology for more complex and larger markets as well. So not all markets have the same level of that complexity. But even for link, I thought that it would still take a while to roll out link to all of NASDAQ private market.

This was referenced in an earlier conversation that I had with you. And at that time, you know, you did say it will take a long, long time. And so I understand that this might have been the first application that you guys pursued because of these ideal conditions. But even then, I think it seems, at least that's what you seem to be saying in the previous interviews that there's still hurdles. Yeah, I think what I hope I said was that it'll take a long time before every, every company, every private company and every investor in private companies uses the technology. Of course, it follows sort of a traditional adaptation and

adoption curve that, you know, some participants in these markets will be earlier adopters than others. And one of the good things is that you don't have to do it. big bag across the entire market, you can sort of adopt this on a, let's say, company by company basis. But of course, if you're a large private company with maybe hundreds of shareholders and you want to switch from a traditional technology to this kind of technology, obviously it is more complex than if you're a to do that, than if you're a new, start up with maybe a handful of investors because you really do not probably don't want to have different technologies running in parallel for the same for the same purpose so you know adoption

of the technology will not be uniform it'll be it'll be sort of happening over time and and and depending upon the size and the need etc of the various companies who want to leverage the leverage the solution. So because at least I consider NASDAQ further along than most other companies in incorporating blockchain technology into its business, I have two questions for you based on your experience. What is the biggest, or what has been the biggest surprise to you in terms of what impact you expected blockchain technology would have on financial services and what impact it's actually having? almost a little bit too early to answer in terms of biggest surprises.

I mean, so far, I think, compared to our experience from looking at other technologies and they're using potential using capital markets, we're sort of following the same curve in a way, so no surprises there. I think, I don't know if it's a surprise, but the very positive thing has been that even though, even if it were to be that blockchain doesn't actually have a role in capital markets on a wide scale in the long term, it has generated a debate about how do we structure a part of our ecosystem. And it is also forced market participants or encouraged market participants to talk to each other about some of the sort of collective utilities. Are we happy with how the post-trade plumbing was?

Are we happy about the level of transparency we provide regulators and so on? So maybe that has been a little bit surprising that the energy with which the community has engaged in this space and actually sort of encouraged, the technology has sort of encouraged the financial markets to sort of look at some of its problems with fresh eyes. I think that has been positive. And then, as I said, in the beginning of the call, that all innovation for over 20 years was focused on the front end. Finally, we have sort of innovation focusing on the post-trade plumbing of capital market. So I think those are positive experiences over the last couple of years, regardless of what happens in the future in a way.

And based on your experience, what advice would you give to other companies also looking to incorporate blockchain into some of their products and services? services? Yeah, I mean, first, really be thorough in understanding what the technology really is and what it can contribute. Avoid falling into the trap of doing POCs and projects just for the sake of doing it, as you, to your point before that, it is not a solution to all problems. I would also say that because the technology potentially labels, you know, new business models and alternative market structures, it is not just a faster engine. It has potentially more fundamental impact on markets than that. I think it's important to very early on engage your business side and your, you know, supporting functions like your compliance regulatory people.

in the process. This is not just an affair for engineers and developers and technologies. And what new products and services do you imagine that blockchain could help NASDAQ offer in the future? So, first of all, some of those will, of course, announce when we get there. But I think it has definitely a role to play in the issuance and the sort of settlement processes of transactions in capital markets. And I can certainly see how it will allow us to provide new services to markets. Link is an example of that. And as a technology supplier, it is interesting to see that now we're starting to get

encouraging signs of people who want to sort of address new market opportunities coming to us and looking for technology. So I think it potentially could lead us. to create new technical solutions building on the NASDAQ financial frameworks to satisfy some of the needs of the clients that have ideas and approach us with them. So I think we will see some new services from NASDAQ based on this. And we could also see some new technical solutions and products coming out from NASDAQ as a consequence of this.

Great. Well, where can people learn more about your work and get in touch with you? I think a good starting point is to get in touch with me. You can always go to nassadck.com. See more about what we do. We recently published a piece on our Estonia initiative in one of our social media links. So, yeah, that's what I would recommend people to do.

Great. Well, thanks so much for coming on the show. My pleasure. Thank you very much. Thanks for joining us today. If you're interested in learning more about Frederick and NASDAQ's work on blockchain technology, check out the show notes which are available on my Forbes page, Forbes.com slash sites slash Laura Shin. Thanks so much for tuning into Unchained. Check back in two weeks for the next episode. And if you've been enjoying the podcast, please remember to review, rate, and subscribe to it in iTunes or your preferred platform. Thanks again for listening.