Blockchain Adoption by the Banking Industry
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Blockchain, the technology underpinning the cryptocurrency, could revolutionize the world economy. Blockchain is basically a distributed ledger. It can store information about who owns a piece of land or a bond. The technology can be used to keep an immutable record of ownership and enable transaction of the asset amongst distrusting parties. It has been trialed by banks to carry out the trading of multiple types of assets. Authors prefer the term “Distributed Ledger Technology (DLT)” but for the purposes of this article, we will use the terms interchangeably.
What are the key benefits of blockchain technology?
Disintermediation: Blockchain provides transaction immutability and a distributed ledger architecture, which are the key requirements for eliminating the need for an enforcer of trust in the ecosystem. Tamper-proof distributed data enables an environment in which trust is not an issue and allows counterparties to operate with the knowledge that they all have the same version of the truth, all the time and its history cannot be altered.
Transparency: Blockchain technology will significantly increase transparency between market participants. Blockchain implementations promote the creation of a public record of activity in the ecosystem to which all market participants have access in real time.
Provenance: Blockchain maintains an immutable record of transactions and therefore, asset ownership since the time the asset first appears in a transaction on the blockchain. This significantly reduces risk and the need for associated mitigating operations for multiple asset types. We believe this capability will enable the reduction of the occurrence of theft, fraud and misselling of high-value assets and intellectual properties as well as assets where the provenance of assets determines its value by creating a digital footprint on the blockchain. Everledger is a good example for diamonds and there are other examples with regard to proving the provenance of organic vegetables.