Italian Bank Intesa Sanpaolo Explores Ethereum Derivatives

A subsidiary of global banking giant Intesa Sanpaolo is taking steps to reimagine what the $1.2 quadrillion derivatives market might one day look like on a public blockchain.

In a new white paper released today, Banca IMI details how an ethereum smart contract built by Intesa Innovation, Banca IMI and blockchain startup Oraclize makes it impossible for any counterparty to default by anticipating eventualities that might otherwise result from a legal dispute.

Written by the bank’s head of interest rate and credit models, Massimo Morini, the paper represents a continuation of work he’s been conducting at Banca IMI for two years. However, it also hints at what sets the bank apart in its approach to the blockchain sector.

While its peers have been largely working to resolve regulatory concerns and protect user confidentiality, Banca IMI has been focusing on the business of derivatives.

But in an exclusive interview with CoinDesk Morini also shed light on two other projects currently underway that he hopes could help inspire entirely new derivatives models using bitcoin and ethereum.

Morini said:

“We tried to design a business model exploiting the technology such that from a financial point of view it works on the public blockchain, because the guarantees are so much stronger than those we have with standard technology.”

On-chain derivatives 

In the paper, Morini opens with a detailed mathematical description of how collateralized derivatives meant to help offset risks can backfire…

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