Quorum, a blockchain of US banking behemoth JPMorgan Chase based on Ethereum blockchain, will now be used to “tokenise” gold bars. The development was revealed to the Australian Financial Review on the sidelines of a Sibos conference in Sidney that took place on 22-25 October 2018
Speaking to the Australian Financial Review on the sidelines of the Sibos conference, JP Morgan’s head of blockchain initiatives, Umar Farooq said:
“We are the only financial player that owns the entire stack, from the application to the protocol,”
He further affirmed his firm belief in Ethereum by saying that:
“We are big believers in Ethereum.”
The use of Quorum blockchain, to “tokenise” gold means that trading between parties can now take place without intermediaries. Considering that Ethereum is well known for its efficacy in smart contracts, the role of intermediaries will be eliminated. Therefore, risks and costs associated with trading gold will be significantly reduced, enabling traders to reap premium market prices. Moreover, it could also usher in a merger of the hitherto isolated markets for particular securities.
Narrating how the tokenisation will occur, Farooq described the procedure saying that:
“They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to endpoint – with the use case being, if you know it’s a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don’t know where it comes from. Diamonds is another example.”
JP Morgan in Blockchain
JPMorgan is arguably the world’s most valuable bank by market capitalisation with total assets valued at $2.534 trillion. The bank had been scouting for a blockchain technology to help harness the competitive advantages of smart contracts. Finally, in a partnership with Ethereum Enterprise Alliance, Quorum was developed.
Quorum was developed as an enterprise version of the Ethereum blockchain, known for its smart contracts. As a result, the blockchain will be used to operate smart contracts and thereby automate processes based on defined rules.
Interestingly, in 2017, JP Morgan chief executive Jamie Dimon described bitcoin as “a fraud” However, earlier this year, he regretted making such a comment but added, “blockchain is real”.
Tokenisation: New Frontiers
At the Sibos conference in Sydney, the use of blockchain to “tokenise” assets became a central topic. Quorum strives to tokenise assets using blockchain technology to digitise them and enable them to move on distributed ledgers efficiently.
Such a development will completely remove the brokers and exchanges from the system and create room for direct transactions. As a result, sellers will be able to get premium prices due to the reduction of costs and risks that had characterised the gold value chain.