Wall Street is interested in blockchain. Recently, Ripple claimed to have received an over 400 percent quarter-on-quarter increase in direct institutional buying at their company. The most prominent name in American financial markets, JP Morgan is finding new use cases for blockchain technology. According to recent reports, the bank is using its Quorum blockchain solution to help sustainable miners receive a premium on global market prices by tokenizing gold bars.
The Enterprise Version of Ethereum
Quorum is the enterprise version of Ethereum that works on smart contracts. The blockchain is designed to provide more privacy and deliver on high-end performance metrics which makes use of the decentralized architecture of the Ethereum system and tops it up with JP Morgan’s experience in providing banking solutions.
Umar Farooq, the head of blockchain initiatives at the bank noted:
“We are the only financial player that owns the entire stack, from the application to the protocol.”
By tokenizing assets, a digital version of the commodities become available to be moved easily on distributed ledgers. The ability to tokenize assets like this for the global digital economy could help in creating new use cases for blockchain technology and allow it to enter industries that have remained unchanged for years.
The most important feature of tokenization is that it allows parties engaged in exchange to work together directly instead of depending on an exchange or a brokerage. This helps in reducing costs and mitigating risks while making the exchange simpler and quicker.
How Is Gold Tokenized for Global Traders?
Farooq noted that tokenizing commodities would help create opportunities for global traders and gave the example of Quorum’s use case in tokenizing gold bars. He talked to the Australian Financial Review and explained how gold bars are tokenized, saying:
“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.”
By tokenizing different assets, like art and real estate, the ownership can also become fractionalized. This will enable a wider range of investors to own a part of a costly asset. JP Morgan could play a crucial role in the use of blockchains in the financial sector. It is a part of the Enterprise Ethereum Alliance along with Credit Suisse and helps in creating standards for the technology.
