5 things you didn’t know about blockchain
Fraud-resistant and almost unhackable, here is how blockchain is starting to deliver on its buzz.
- A blockchain is a string of unique digital information stored across a network of computers.
- CBA, the World Bank and Perth Mint are just some institutions involved in developing products built on blockchain.
- Blockchain has the potential to improve the traceability of supply chains, reducing the incidence of corruption and slavery.
By Seamus Byrne
Blockchain technology is arriving right when the digital world needs it most. The ability to create an online ledger that is distributed, verifiable and tamper-proof gives business a tool that can make trust-intensive decisions much easier. So how does it work? Put simply, a blockchain is a string of unique digital information, stored across a network of computers. Each time a verified interaction takes place, a new block of unique digital information is added, and the blockchain updates across the entire distributed network. In theory, that makes it unhackable, and here are five ways blockchain is moving from theory into practice.
1. CBA and World Bank issued the first blockchain bond
In August 2018, Australia’s Commonwealth Bank worked with the World Bank to issue bond-i (blockchain operated new debt instrument). With a name that echoed the famous Sydney beach, this was the first bond to be entirely created, allocated, transferred and managed using distributed ledger technology. The two-year bond raised A$110 million, and in May 2019 a secondary market was enabled for the bond to allow for trading of the securities.
2. Perth Mint goes crypto
Picture: The Perth Mint.
Much of the early years of blockchain was focused on cryptocurrencies, with financial value largely based on speculative interest from fans and investors. But some initiatives aim to underpin cryptocurrencies with real-world reserves. The Perth Mint, in collaboration with the Rozetta Institute, recently launched its Perth Mint gold token (PMGT) as a way to make its gold reserves tradeable on a blockchain. Each PMGT unit is backed 1:1 with gold in its vaults. A buyer can even opt to ‘cash in’ their PMGT and receive the gold value it represents.
This is not a cryptocurrency in the style of Bitcoin. It is akin to a secure contract exchange that allows investors to digitally trade real gold without needing to possess, secure or arrange delivery of the raw materials. The International Monetary Fund has called for central banks to consider issuing reserve-backed digital currencies.
3. Bank guarantees on an IBM blockchain
Commonwealth Bank, ANZ and IBM have partnered on a trial project with Scentre Group, the Australian operator of Westfield malls, to issue rent guarantees for retailers. Retailers need these bank guarantees to secure a lease over a retail tenancy. The Lygon platform, run on IBM blockchain technology, was trialled by the project in mid 2019. As well as reducing opportunities for fraud, using blockchain saw a process that usually can take up to a month being completed in about a day.
4. ASX is moving share trade management onto blockchain
In 2018, the Australian Securities Exchange (ASX) announced it would move its post-trade transaction clearance process onto a custom blockchain technology, replacing the current Clearing House Electronic Subregister System (CHESS). Final testing will begin in mid-2020, with a full transition to the new distributed ledger system expected to take place across one weekend in late 2020 or early 2021. The new system is being tested to manage up to 10 million transactions per day – the ASX currently processes between 5-6 million.
5. Blockchain leaves corruption with nowhere to hide
Where an industry fully adopts blockchain as a trusted immutable ledger of all transactions, it has the potential to help in the fight against corruption. Last year, the CEO of industrial design software company Autodesk, Andrew Anagnost, said that blockchain technology could reduce corruption in the building industry.
“They don’t actually want a clear record of who did what, when and how,” he said. “It’s going to take a lot of us enforcing this and making it not optional to trace who did what and when.”
In industries such as mining, blockchain could even help reduce slavery. Tech developers Everledger and Provenance are targeting diamond and other minerals industries to improve traceability of supply chains. If intermediaries are required to perform transactions on a distributed ledger, it becomes easier to know where the minerals were sourced. This would make the ethics of the source mine a known factor for manufacturers.
The future of blockchain
Read the Chartered Accountants ANZ whitepaper that reveals the applications and remarkable implications of blockchain technology.Find out more on blockchain