Ready Layer One

“Just as there is a Magnificent Seven of stocks in web 2.0 today, I believe there will be a comparable set of companies representing blockchain technology in web 3.0.” — Mike Cagney, co-founder and executive chairman, Figure Technology Solutions.

In 2015, New York technology startup Digital Asset Holdings hired a former JPMorgan executive, Blythe Masters, as its new chief executive officer. Masters was well known in traditional finance circles. Back in the 1990s, she’d played a leading role in the development of credit defaults swaps – a transformative innovation in the industry. At Digital Asset Holdings she hoped to advance another innovation in the financial services industry: blockchain.

Despite never becoming particularly enamored with cryptocurrency, Masters saw huge potential in the technology underpinning it. “This is a technology that enables institutions to do what they do already today using databases, but a lot quicker, a lot cheaper, with far lower error rates, with less resulting risk, and as a result with lower capital requirements and less vulnerability to cyber attack,” she said. One of her first clients was the Australian Stock Exchange. The Sydney-based exchange hired Digital Asset Holdings to build a new platform to replace its creaking clearing and settlement systems. A blockchain solution was seen as an exciting leap forward. “Blockchain technology offers unprecedented opportunities to transform the way markets operate,” said the Exchange’s CEO.

The project was meant to be completed in 2020 but it ran into trouble. As early as 2018, scalability issues were identified and when the pandemic hit, the implementation timetable was pushed out. After multiple delays, consultants from Accenture were called in to look at the state of the project. They concluded that by November 2022, the work was only 63% done. Amid much embarrassment, the project was ultimately dropped, triggering a parliamentary hearing and a regulatory lawsuit, with the Exchange forced to absorb a US$175 million write-off.1

When it was announced, the deal was seen by many as a test case for the use of blockchain in financial services. In a letter to prospective investors, Mike Cagney, co-founder and executive chairman of Figure Technology Solutions, another company that deploys blockchain-based technology in finance, reminisces about the challenge he faced pitching to banks in 2018. “This is great!” they told him. “We love it! We’d like to be the 10th bank to do this…” Financial institutions around the world were ...