Itaú deployed the key technology behind bitcoin and other crypto-coins in one of its financial operations.
The bank is part of a wave of financial institutions that keep away from virtual currencies because they are not regulated or obeying rules by financial authorities, but they welcome the blockchain, a technology fundamental to these currencies.
A type of large "digital book", the "blockchain" registers various types of information in a secure, encrypted and verifiable form. In addition, this data can be stored in distributed form, that is, by several computers. some information will not make it possible to reconstitute the entire chain.
Imagine an "accounting book," whose "pages" are stored in various "libraries" scattered around the world. Deleting the knowledge present in this publication is difficult because its various "copies" are not in the same place. Changing this knowledge is also an arduous task, since the information printed on these "sheets" has been coded.
Understand what blockchain is, the technology behind bitcoin
"This is a technology that we are betting on, looking at the strength of the security and cryptography it has, as well as the transparent way in which transactions can take place, which gives more visibility to all the members," says Cristiano Cagne, director of operations of Itaú Unibanco. The executive says the bank is the first Brazilian to implement a solution based on this technology.
Block current
Operating fully since January, the technology is called Blockchain Collateral and is not targeted at the bank's individual customers. The data recorded in this "block flow" are the margin calls of over-the-counter derivative guarantees.
These transactions are contracted jointly by investors who want to protect themselves against the future variation of an asset. The derivative provides a safe margin of price fluctuation. As payments are made only at the end of the term of the agreement, the contractor has to make a deposit once the transaction is completed. That is, it gives a guarantee that it will pay off the debt. But this value changes according to the oscillation of the price of the asset that gives back to the contract and with a formula agreed between the parties.
This calculation is the subject of intense discussion among those involved. "Previously, you had an endless email exchange and email is not one of the best ways to save and validate this kind of situation," explains Cagne.
A single block
To facilitate this process, Itaú's "blockchain" records the formula for calculating this margin. "It gets encrypted and definitely recorded. If, for any kind of problem in the future, it is necessary to resort to that situation, it is there. And from there you have a discussion, even if it's legal. "
The "block chain" of the bank works differently from that of virtual currencies, where all exchanges of values are recorded and made visible to anyone. As are the transactions of coins that enter the "blocks", the pairing of them forms a large chain. In Blockchain Collateral, there is only one block.
"We are not making several blocks, because I do not have to give transparency of an operation that I closed with bank A for banks C, D and E. It is different from the criptomoeda, in which you have to do this. Everyone needs to see and everyone has to agree. Here, it's only the two parties that need to agree, "says Itaú's director.
For now, Itaú has adopted a "blockchain" for over-the-counter derivative contracts with other banks. Two already participate in the initiative and two others have expressed interest. Their names were not revealed.
The technology used by the Brazilian bank uses the Corda platform, created and maintained by the international consortium R3. The organization brings together financial institutions and technology companies, such as Microsoft, Intel and Oracle, which develops "blockchain" solutions. In addition to Itaú, Bradesco is also part of R3.