Over the last two years, on-blockchain assets have grown rapidly in both quantity and value. However, over the same period, news headlines are showing that on-blockchain assets bring security issues. In order to make investment in such assets more secure, a UK-based team of blockchain professionals have developed a management system prototype called ‘Wealthman’. Wealthman is a blockchain-based platform that enables any party to provide a decentralised wealth management service with digital assets and nevertheless have the same level of trust from investors as large well-known brands. Developing Wealthman, the team focused on elimination of all security threats, but noticed that blockchain itself has fundamental issues inherent in the consensus process. These issues are such that they may only be solved by the creation of a global court with the power of blockchain regulation.
What is a Blockchain Asset?
Traditional assets like company shares, real estate, currency or fixed-income securities are accounted by a designated party. It might be a bank for currency, a depository or registry for securities, or a local real estate register for real estate.
Blockchain is a distributed transaction recording technology that prevents falsification of transaction details and duplicate transactions. It enables autonomous transaction record operations without the need for a designated administrator. This means it can play the role of community-driven registry for any asset.
The legal nature of the on-blockchain asset is arbitrary. So, a company can say that this entry in the blockchain is a share in equity, and gives the right to vote and receive dividends. Or, the company may say it is a bond, or even a discount coupon. Hence, blockchain assets are not a separate class of assets, as many believe, but rather a new and more progressive way of accounting for them.
Thus, there are now two methods of asset accounting: blockchain and centralised registry. As at May 2018, blockchain assets are about $466 bn , which is just 0.04% of the $1200 trillion assets accounted on centralised registers .
Assets in the centralised register are vulnerable.
Financial institutions that hold clients’ assets are under the jurisdiction of the laws of a particular country. Therefore, they are forced to obey the sometimes unfair, politically motivated actions of the authorities. By the decision of the authorities, assets can be seized, blocked, etc. In addition, assets stored in banks, brokers or depositories are often lost in cases of the bankruptcy of such an institution. This already happens systematically in all jurisdictions without exception.
Blockchain assets come to the rescue, but have an Achilles’ heel.
Instead of a central authority figure, blockchain uses consensus decision-making in which network members (called nodes) develop, and agree to support a decision. That is why a peer registry helps to protect assets from centralisation vulnerabilities. However, other challenges arise at the same time…
It is well known that blockchain security methods use public key cryptography for identification of asset owners. This means that a key pair is used: public and private. The public key is open and is designed to verify that the holder of the private key sent a message/transaction. The private key is known only to its holder and allows them to sign transactions. A transaction could mean a payment, a vote, a transfer of assets, etc.
The problem is that on-blockchain assets cannot be recovered in case of an unfair loss. This could be caused in several ways:
- theft or loss of the private key
- hardware hack 
- bugs in the solutions of third providers  , etc.
Whatever the reason, the victim would not be able to obtain help from the judiciary, as the latter would not have the private key.
There are two fundamental ways to address such issues:
(1) The establishment of a global court that extends its jurisdiction to all computers in the world and thereby will have the power to influence entries in the distributed registry. Besides asset recovery, such an authority will be the only protection against the joint attack of miners, and against unbalanced growth of computational power, which allows the decryption of private keys more cheaply than the assets represented by those keys.
The UN International Criminal Court may evolve into a global court with the power of regulation of blockchain. However this will happen only after the blockchain has achieved its globalisation function.
(2) Creation of asset protection solutions which are trustless and error resistant. These could be implemented based on smart contracts and could be a hybrid combination of blockchain, overlay networks and client apps.
The developer community is working hard on the creation of multiple solutions to address this issue. There are multi-signature wallets (Armory), decentralised exchanges (Openledger, Stellar, 0x, IDEX), decentralised wealth management platforms (Wealthman), micropayment protocols (RSK, Lightning Network, Plasma), etc.
A protocol for trustless wealth management is perhaps one of the most important and disruptive developments of the last year, because it will be the basis for movements of extremely large capital amounts. A dozen ultra-high net worth clients operate greater capital than the value of all current blockchain assets.
The Wealthman protocol aims to disrupt the $100 trillion wealth management industry, as bitcoin did with currency. The protocol implements incentives and rules of interaction so that the involved parties do not deviate from taking fair decisions. For example, data providers earn tokens by supplying publicly available data into the system. Any attempt to suddenly stop data provision or to enter wrong data would be penalized.
Wealthman Ltd. is a London (UK) based company developing a stack of protocols and microservices facilitating the building of trustless wealth management services. The trustless design is used to overcome fraud and to bring efficiency. The platform has existing clients and expects to exceed an AUM volume of 2 bn dollars within two years. The market values of its peers have grown dramatically (e.g. Melonport:14 fold in one year; Iconomi: 10 fold in two years).
For additional information about Wealthman please visit: www.Wealthman.io