Many industries such as asset or investment fund management and banking are loaded with inefficiency due to their standing as a trusted third party. As a result, cryptocurrency and blockchain projects have emerged to help reduce these inefficiencies. Goldman Sachs has introduced their own blockchain-based settlement network for resolving transactions across many levels of business.
Because blockchains allow for instant or near-instant transaction resolution and confirmation, it is attractive for investors and bankers. The blockchain is secure and can be used to increase transparency, so it has garnered a large following in a relatively short period of time. Regulatory compliance requirements could change how the community responds to a given currency.
Cryptocurrencies have been on a slow decline over the last couple of weeks, with bitcoin resting around $2,300 and ETH stabilizing around the $200 mark, according to the WorldCoinIndex. Goldman Sachs is seeking to push forward with the acceptance of cryptocurrency use to secure and trade assets such as stock shares, land deeds, or precious metals.
What is SETLCoin?
SETLCoin is the digital framework that Goldman Sachs has designed to digitize real-world assets and improve transaction resolution times for asset trades. Cryptocurrencies like Ether are renowned for their quick resolution, and others like Bitcoin are widely-known for being immutable, or unable to be changed.
How does it work?
SETLCoin relies on a trusted third-party to verify the existence of assets upon creation of SETLCoins. Such an entity may reasonably be the SEC, according to the patent, which can be viewed here. After the assets have been verified, a corresponding SETLCoin will be created and the SETLCoin token can be transferred on the blockchain.
Assets need only be verified once in order to be able to transfer trustlessly across the network because they are secured by the network and have already been vouched for by globally reliable trustees.
When sending assets, however, users must be careful of sending them to the right place, as with other blockchain networks, it is not likely that transactions can be changed or reversed. Immutability provides the needed insurance against fraudulent activity.
What makes SETLCoin unique?
SETLCoin is among the first of its kind, a cryptocurrency that will be implemented on a corporate scale for use in everyday business. By simplifying the processes associated with blockchain networks, Goldman Sachs may yet replace traditional business transaction and payment networks as far as asset transfer operations are concerned.
Complimenting the novelty of SETLCoin is a patent, issued by the U.S. Patent and Trademark Office (USPTO) for a new “Cryptographic Currency For Securities Settlement.” The patent was initially made public in 2015 upon being published.
How are SETLCoins created?
SETLCoins are made up asset verification by a trusted third party. After a third party has vouched for the asset initially, a ‘digital twin’ is created, and a trusted party is no longer required to facilitate asset transfers as the digital twin can be verified by the SETLCoin network.
Both wallets and distributed ledgers are vital components of SETLCoin and enable digital twin assets to cross borders more freely and in far less time than the traditional one-to-three business days.
Where will SETLCoins be stored?
SETLCoins will be stored in a multi-asset blockchain wallet designed by Goldman Sachs. While the wallets will be used to store SETLCoins, they will also be used to facilitate coin transactions and peer-to-peer transaction on their blockchain network.
This multi-asset wallet was listed as a portion of the novel design in the patent application, which was filed in October of 2014. Paul Walker (Co-head, Bank Technology Div.) and Phil Venables (Chief Information Risk Officer) are listed as inventors on the patent.
SETLCoins can be used to store both different securities and also different denominations of individual securities, such as LTC, BTC, ETH, and digitized company shares or even preferred shares and precious metals. Other assets that can be stored on SETLCoin include land deeds, vehicle titles, and virtually any proof of ownership.
SETLCoin is providing a base for investors to transfer their traditional assets (stocks, bonds, gold, silver, etc.) onto the blockchain and trade them more reliably, cheaper, and much faster than previously possible. The project was announced publicly by the USPTO in late 2015 and has continued to receive funding and technical focus since 2014 from one of the world’s largest investment banks.
While the cryptocurrency community may have mixed feelings about the involvement of the SEC and other large regulatory bodies, only time will tell whether or not the change will have a positive impact on cryptocurrency as a whole. It will likely improve the standing of the banking industry as a whole, regardless.