The fintech company has completed a major successful blockchain test

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Axoni, a blockchain fintech, has successfully completed tests of a blockchain-based system that simplifies one of the most complex areas of trading — equity swaps — in partnership with Barclays, Citi, Credit Suisse, JPMorgan, and Thomson Reuters, among others, IB Times reports.

Equity swaps are financial contracts that allow participants to benefit from the returns of an equity security or index without purchasing it. They typically involve agreements between parties that can last up to one year. In order to conduct these transactions, many firms — both dealers and financial firms — have built their own systems, which require bespoke connectivity to one another.

These firms must also constantly monitor factors that might affect the transaction, such as fluctuations in equity prices, Libor rates, and unexpected actions by corporations — some of which require manual updates to the contracts. And largely because of this complexity, there is no centralized repository for the clearing or reporting of equity swaps.

The system is designed to solve several major pain points for institutions executing equity swaps. First, it provides a standardized framework that all parties can connect to, eradicating the need for multiple bespoke connections. Second, it automatically absorbs relevant information from Thomson Reuters' feeds to enable the automatic implementation of changes to the contract that result from changes in price, etc.

And finally, the blockchain provides an immutable record of the contracts that have been executed, and under what conditions, enabling people with access to the blockchain to detect any errors almost immediately. This also limits the possibility of disputes or discrepancies. 

The successful testing of this system means a real-world application for blockchain in financial services is closer than ever before. The involvement of multiple major banks is key, as the success of any blockchain technology requires widespread adoption of the same system. This testing scenario was also much more complex than many blockchain-based financial services prototypes to date.

And Axoni and the FS providers involved claim that they carried out 133 different trials, which had a 100% success rate. This suggests that blockchain technology is passing the prototype and proof-of-concept stage, where it has long languished, and moving toward real-world implementations. 

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.