Name: Chainlink at Sibos 2023 – The future of on-chain finance and tokenisation
Uploaded: 2023-10-19T15:49:20.752Z
Duration: 673.33
Description: At the Sibos 2023 conference in Toronto, FinTech Futures sat down with Sergey Nazarov, co-founder of Chainlink, to discuss why leading banks and financial institutions are so excited about on-chain finance and tokenisation and what’s been holding their adoption of blockchain technology back.

11-Sergey Nazarov.mp4

11-Sergey Nazarov.vtt

ENGLISH

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This is FinTech

{{00:00:07}}
Futures at Sibos and I'm
joined by Sergey Nazarov,

{{00:00:10}}
co founder of Chainlink.

{{00:00:11}}
Sergei, thank you so much for taking
the time out to come and speak with us.

{{00:00:13}}
Just to get started with us, give us
a quick introduction to yourself and

{{00:00:16}}
the work you're doing at Chainlink.

{{00:00:17}}
Sure.

{{00:00:17}}
My pleasure.

{{00:00:18}}
Thank you for having me.

{{00:00:19}}
So Chainlink is the market leading
standard for connectivity and

{{00:00:23}}
interoperability across chains.

{{00:00:26}}
It injects the largest amount of
data into A very large amount of

{{00:00:30}}
different chains powering the majority
of DeFi in the public chain world.

{{00:00:35}}
And here in the private chain bank
world we're starting to power a

{{00:00:38}}
lot of the top banks, institutions,
CSDs with our CCIP protocol.

{{00:00:43}}
The CCIP protocol plays a very similar
role to TCPIP in the internet, where

{{00:00:48}}
TCPIP connected a lot of disparate
different internet technologies into one

{{00:00:52}}
network that we now know as the internet.

{{00:00:54}}
And it's actually a very similar situation
to what with the fragmentation industry.

{{00:00:59}}
What CCIP does is it connects
all the fragmented blockchain

{{00:01:02}}
technologies into what we call
a single Internet of Contracts.

{{00:01:05}}
And that's the thing that's of
particular interest to banks,

{{00:01:08}}
CSDs, various other market

{{00:01:10}}
infrastructures here
at Sibos because they,

{{00:01:12}}
I think, now understand that
they're going to need to connect.

{{00:01:16}}
All the different chains within their
various ecosystems into one Internet

{{00:01:20}}
of Contracts in order for them to
be able to transact with each other.

{{00:01:23}}
So

{{00:01:23}}
we're here at Sibos and you've

{{00:01:24}}
been appearing on a number of panels
over the course of this week with a

{{00:01:27}}
number of large financial institutions.

{{00:01:29}}
Why are leading banks and institutions
so excited then about on chain

{{00:01:32}}
finance right now and tokenization?

{{00:01:35}}
I think it's a large and growing
market where they see both their

{{00:01:38}}
clients and other banks wanting to
gain access to various advanced assets.

{{00:01:42}}
So I'm seeing a lot of stuff for
carbon credits, some real estate

{{00:01:46}}
and some fund tokenization.

{{00:01:48}}
But I think beyond that, they realize that
this market is going to grow massively

{{00:01:52}}
because it's inherently a global market.

{{00:01:54}}
So all this blockchain technology.

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that banks are adopting will be
extremely accessible globally

{{00:02:00}}
by all their counterparties.

{{00:02:02}}
And so they're I think seeing that a
lot of value will migrate into these

{{00:02:06}}
stablecoins and real world asset tokens
and all these other various systems.

{{00:02:10}}
And so what we do with them is we
make sure that when they make a

{{00:02:14}}
real world asset or a stablecoin on
one of these chains of theirs, that

{{00:02:17}}
it's properly connected to all the
other bank chains, which basically

{{00:02:20}}
gives them liquidity and usage.

{{00:02:22}}
and Market Adoption.

{{00:02:23}}
Excellent.

{{00:02:24}}


{{00:02:24}}
One of the things that's
been coming up as well is the

{{00:02:26}}
blockchain intraprivilege problem.

{{00:02:27}}
Can you tell us a little
bit more about that?

{{00:02:30}}
Sure.

{{00:02:30}}
So there's two levels to that problem.

{{00:02:32}}
The first one is how do banks from their
existing systems efficiently integrate

{{00:02:37}}
with hundreds of different chains?

{{00:02:39}}
That's a very serious problem
because integrating with those

{{00:02:42}}
hundreds of chains is very difficult.

{{00:02:44}}
Many of them constantly change.

{{00:02:46}}
Some of them get completely redone and
reshipped and all this type of stuff.

{{00:02:51}}
So basically the first problem is,
how do you connect to all the chains

{{00:02:54}}
from your existing bank systems?

{{00:02:56}}
That's something we've worked on
solving together with Swift, where you

{{00:02:59}}
can use Swift messages to basically
trigger blockchain transactions

{{00:03:03}}
on hundreds of different chains,
using our system called CCIP.

{{00:03:07}}
And CCIP, as it's integrated into all
these chains, allows you to connect to

{{00:03:10}}
all of them through one integration.

{{00:03:12}}
So you go from a world of having to
connect to thousands of chains eventually.

{{00:03:15}}
to a world where one integration allows
you to connect to hundreds of chains and

{{00:03:19}}
then thousands of chains through that
one system that is much easier for you

{{00:03:23}}
to use from your existing infrastructure.

{{00:03:26}}
So the friction for you to
connect goes way down with the

{{00:03:28}}
help of Chainlink and CCIP.

{{00:03:30}}
The second part of the interoperability
problem is when a bank chain, made by

{{00:03:35}}
a bank, has to connect to another bank
chain because that other bank chain holds

{{00:03:40}}
value or holds liquidity that wants to
purchase something on the first chain,

{{00:03:45}}
or there's something on the second chain
that the first bank wants to purchase.

{{00:03:49}}
And so if you have your own chain, you're
just siloed in your own kind, little world

{{00:03:54}}
without the rest of the world's liquidity
and value having access to your chain.

{{00:03:59}}
And this fundamental problem is something
I think all banks CSDs and a whole bunch

{{00:04:03}}
of others have now fundamentally realized.

{{00:04:06}}
And I think what they've realized is
that even if they make a successful

{{00:04:09}}
chain, even if they make high quality
real world assets or good stablecoins,

{{00:04:14}}
if their chain is not connected to
the other multitude of chains, then

{{00:04:18}}
there's no way they can be successful.

{{00:04:19}}
And it's not even a question
of the blockchain technology

{{00:04:22}}
they use, it's a question of...

{{00:04:24}}
How do they connect to all
these counterparties in

{{00:04:26}}
these other environments?

{{00:04:27}}
And so that problem is solved with CCIP.

{{00:04:30}}
Excellent.

{{00:04:30}}
You mentioned that
collaboration with SWIFT there.

{{00:04:32}}
Can you tell us a little bit more about
that as well, and what that might mean for

{{00:04:35}}
the future interoperability going forward?

{{00:04:38}}
Sure.

{{00:04:38}}
So SWIFT has been around for over 50 years
now, and they've been securely providing

{{00:04:43}}
the ability to sign transactions.

{{00:04:45}}
using their PKI private
public key infrastructure.

{{00:04:49}}
And that infrastructure is very
important because it's deeply

{{00:04:52}}
integrated into over 11, 000 banks,
which means that they have a way for

{{00:04:56}}
11, 000 banks to sign transactions.

{{00:04:58}}
Right now, those transactions go over.

{{00:05:01}}
Swift Rails, Swift Routing
Systems, and Swift Messages.

{{00:05:05}}
But if you could get Swift Messages
to properly interact with blockchains

{{00:05:10}}
through CCIP, then you could suddenly
have 11, 000 banks accessing all of

{{00:05:14}}
the world's blockchains, and accessing
their own individual chains and

{{00:05:18}}
the chains of their counterparties.

{{00:05:21}}
Our work with SWIFT is really focused
on using the existing standards

{{00:05:25}}
and the existing infrastructure of
the banking industry, which as the

{{00:05:28}}
banking industry doesn't like to throw
out their existing infrastructure,

{{00:05:30}}
they like to keep using it.

{{00:05:32}}
So how do you use that existing
infrastructure to efficiently connect with

{{00:05:36}}
the hundreds and thousands of chains in a
way that each bank can do it in a matter

{{00:05:41}}
of days or weeks, not months or years.

{{00:05:44}}
And accelerating that is
really beneficial to everybody.

{{00:05:48}}
It's beneficial to the SWIFT network.

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It's beneficial to the banks that get
on to blockchains in an accelerated way.

{{00:05:54}}
And it's also very beneficial to the
blockchain ecosystem because there's

{{00:05:57}}
more and more value in the system.

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Excellent, And what would you say
makes blockchain interoperability

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then so critical for banks?

{{00:06:05}}
I think the main thing is
there's two main things.

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One is liquidity.

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So the access to the other counterparties
that are going to purchase their assets.

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If you don't have an interoperability
solution that connects your chain and

{{00:06:18}}
its assets to all the other bank chains
where people are going to purchase and

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use your assets, then your liquidity
and your market is actually very small.

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So that's the main first value.

{{00:06:30}}
The second thing is really security
and the ability to securely communicate

{{00:06:34}}
with those other chains and even
trigger events on those chains.

{{00:06:38}}
without having to go there.

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So the second thing is, how do
you securely interact with chains

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in more and more advanced ways?

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Where not only can you send
value, but you can make the value

{{00:06:47}}
do something on those chains.

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Which means that you don't
even have to go to that chain.

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You can stay in your environment,
and effect and invoke events and do

{{00:06:54}}
things in other places, while not
having to integrate with those places.

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So what exciting use cases do
you see banks and other financial

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institutions then building with
tokenization and on chain finance?

{{00:07:06}}
So I see them doing a lot of work on
new types of assets like carbon credits.

{{00:07:10}}
That's an exciting one where
there aren't existing standards

{{00:07:12}}
and ways of doing these things.

{{00:07:14}}
I see some amount of real
estate tokenization and some

{{00:07:17}}
amount of fund tokenization.

{{00:07:19}}
But realistically, I think they
are now starting to realize.

{{00:07:23}}
that all the value in their systems
will eventually be on a blockchain.

{{00:07:27}}
So these initial use cases are things
where they're not in any system.

{{00:07:31}}
And so you might as well put them
on this new system if you can.

{{00:07:35}}
So it's newer things or things
where there's very little fractional

{{00:07:40}}
ownership where that has value.

{{00:07:43}}
I think though, and I think they're
starting to realize this, that all

{{00:07:46}}
of the value in their systems will
eventually be on a blockchain.

{{00:07:49}}
And they're realizing that these initial
asset classes are just the beginning.

{{00:07:54}}
Excellent, And just to finish off then,
how do you anticipate tokenization

{{00:07:57}}
and blockchain interoperability
changing the face then of financial

{{00:08:00}}
institutions and financial services
over the next five years or so?

{{00:08:04}}
I think we're going to arrive at a world
where every bank actually has multiple

{{00:08:08}}
blockchains, probably different chains
for different specific categories

{{00:08:12}}
of assets or different markets.

{{00:08:14}}
So every bank will have multiple chains.

{{00:08:16}}
Just like they have multiple databases.

{{00:08:19}}
Those chains will then need to be
connected to the multiple chains

{{00:08:21}}
of other banks that represent
their relevant markets and

{{00:08:24}}
regions and, various asset types.

{{00:08:28}}
And this is going to be
driven by the efficiency with

{{00:08:30}}
which you can make a chain.

{{00:08:32}}
So historically it's been
very hard to make a chain.

{{00:08:34}}
It's been a complicated process to
launch one and make it secure, but

{{00:08:38}}
that process is becoming more and
more easy to use, easy to implement.

{{00:08:43}}
And so I think there'll be this.

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Huge amount of new chains coming out,
multiple chains for each bank, that,

{{00:08:49}}
so there'll be a lot of fragmentation,
and then and even now the problem will

{{00:08:53}}
be, and is, how do you connect all
those chains into a single network of

{{00:08:58}}
of communication and a single network
of value moving across those different

{{00:09:02}}
chains so that All the different
contracts and all those different

{{00:09:05}}
chains can transact with each other.

{{00:09:07}}
And the fundamental problem there from
the banking point of view is going to

{{00:09:10}}
be liquidity, and the access to markets
and the ability to take your assets

{{00:09:13}}
and make them available to others,
so they can purchase your assets,

{{00:09:17}}
or for you to purchase their assets.

{{00:09:18}}
So this is the thing that
we're solving with CCIP.

{{00:09:21}}
It's the ability for all of these
different bank chains to become

{{00:09:25}}
connected with each other and
transact with each other reliably.

{{00:09:28}}
And that's a critical building block.

{{00:09:31}}
And then the final thing is, I think the
assets that they make on these chains that

{{00:09:35}}
get moved around through CCIP are going to
have very large amounts of data injected

{{00:09:39}}
into them to make them good golden records
or good single sources of truth that

{{00:09:44}}
prove a lot of things about the asset in
ways that manage the risk of that asset

{{00:09:50}}
much better than the existing methods.

{{00:09:51}}
So the existing methods,
you could have some asset.

{{00:09:54}}
And A, you need a lot of money to have
that asset because fractional ownership

{{00:09:57}}
doesn't really exist in many cases.

{{00:09:59}}
So now you'll have fractional ownership.

{{00:10:01}}
That fractional ownership will be very
easy to transact for many different

{{00:10:04}}
chains, for many different banks.

{{00:10:05}}
And that'll be much quicker than
today's systems and much more cost

{{00:10:08}}
efficient and much better in many ways.

{{00:10:10}}
And then the asset that you have
this fractional piece of will have

{{00:10:13}}
a lot of information attached to it.

{{00:10:15}}
So you'll know everything about the asset.

{{00:10:17}}
What the status of the asset is, what
the value of the asset is, if there's

{{00:10:20}}
anything significant that's changed
about the asset, and you won't have to

{{00:10:23}}
rely on your research or the bank to
tell you or some credit agency to tell

{{00:10:27}}
you, all that information will be input
into the asset, possibly by the credit

{{00:10:31}}
agency and the bank and data providers.

{{00:10:32}}
But so you'll have more assets that are
easier to own, easier to move, easier to

{{00:10:39}}
transact, and the risk will also be lower.

{{00:10:41}}
So that, I think will, benefit
globalization, the ability for everyone

{{00:10:47}}
to transact globally about these assets,
and I think it'll also greatly reduce

{{00:10:50}}
systemic financial risk, because all
that information in those assets will

{{00:10:54}}
allow people to make well informed,
accurate decisions about assets that

{{00:10:58}}
are less risky rather than more risky.

{{00:11:01}}
Exciting times.

{{00:11:02}}
Sergey, thank you so much again
for taking the time out to speak.

{{00:11:04}}
This has been a pleasure.

{{00:11:05}}
My pleasure.

{{00:11:06}}
Thank you.

Futures at Sibos and I'm
joined by Sergey Nazarov,

Sergei, thank you so much for taking
the time out to come and speak with us.

Just to get started with us, give us
a quick introduction to yourself and

So Chainlink is the market leading
standard for connectivity and

It injects the largest amount of
data into A very large amount of

different chains powering the majority
of DeFi in the public chain world.

And here in the private chain bank
world we're starting to power a

lot of the top banks, institutions,
CSDs with our CCIP protocol.

The CCIP protocol plays a very similar
role to TCPIP in the internet, where

TCPIP connected a lot of disparate
different internet technologies into one

network that we now know as the internet.

And it's actually a very similar situation
to what with the fragmentation industry.

What CCIP does is it connects
all the fragmented blockchain

technologies into what we call
a single Internet of Contracts.

And that's the thing that's of
particular interest to banks,

infrastructures here
at Sibos because they,

I think, now understand that
they're going to need to connect.

All the different chains within their
various ecosystems into one Internet

of Contracts in order for them to
be able to transact with each other.

been appearing on a number of panels
over the course of this week with a

Why are leading banks and institutions
so excited then about on chain

I think it's a large and growing
market where they see both their

clients and other banks wanting to
gain access to various advanced assets.

So I'm seeing a lot of stuff for
carbon credits, some real estate

But I think beyond that, they realize that
this market is going to grow massively

that banks are adopting will be
extremely accessible globally

And so they're I think seeing that a
lot of value will migrate into these

stablecoins and real world asset tokens
and all these other various systems.

And so what we do with them is we
make sure that when they make a

real world asset or a stablecoin on
one of these chains of theirs, that

it's properly connected to all the
other bank chains, which basically

One of the things that's
been coming up as well is the

Can you tell us a little
bit more about that?

The first one is how do banks from their
existing systems efficiently integrate

That's a very serious problem
because integrating with those

Some of them get completely redone and
reshipped and all this type of stuff.

So basically the first problem is,
how do you connect to all the chains

That's something we've worked on
solving together with Swift, where you

can use Swift messages to basically
trigger blockchain transactions

on hundreds of different chains,
using our system called CCIP.

And CCIP, as it's integrated into all
these chains, allows you to connect to

So you go from a world of having to
connect to thousands of chains eventually.

to a world where one integration allows
you to connect to hundreds of chains and

then thousands of chains through that
one system that is much easier for you

to use from your existing infrastructure.

So the friction for you to
connect goes way down with the

The second part of the interoperability
problem is when a bank chain, made by

a bank, has to connect to another bank
chain because that other bank chain holds

value or holds liquidity that wants to
purchase something on the first chain,

or there's something on the second chain
that the first bank wants to purchase.

And so if you have your own chain, you're
just siloed in your own kind, little world

without the rest of the world's liquidity
and value having access to your chain.

And this fundamental problem is something
I think all banks CSDs and a whole bunch

of others have now fundamentally realized.

And I think what they've realized is
that even if they make a successful

chain, even if they make high quality
real world assets or good stablecoins,

if their chain is not connected to
the other multitude of chains, then

And it's not even a question
of the blockchain technology

How do they connect to all
these counterparties in

You mentioned that
collaboration with SWIFT there.

Can you tell us a little bit more about
that as well, and what that might mean for

the future interoperability going forward?

So SWIFT has been around for over 50 years
now, and they've been securely providing

using their PKI private
public key infrastructure.

FinTech Futures

Expert Insight

At the Sibos 2023 conference in Toronto, FinTech Futures sat down with Sergey Nazarov, co-founder of Chainlink, to discuss why leading banks and financial institutions are so excited about on-chain finance and tokenisation and what’s been holding their adoption of blockchain technology back.