It is no secret that Nasdaq is keeping a close eye on the evolution of blockchain technology. The value of this innovative technology extends far beyond the financial realm, although most of the innovations over the next few years will take place in this sector. But Nasdaq isn’t an entity to come up with a half-devised plan, and they are preparing to introduce the blockchain to their Estonian settling and clearing business soon.
Uniting Blockchain Technology With Settling and Clearing
Even though the settling and clearing business is one of the oldest financial infrastructures known to society, the process has become very cumbersome and time-consuming. Every payment made in the world passes through clearing and settling businesses, delaying money transfers by as much as weeks, depending on the region.
It goes without saying this system needs an upgrade sooner rather than later, and this is where blockchain technology can play an important role. Because of the blockchain’s shared distributed ledger, storing, recording and transferring digital assets can be done in near real-time, at a fraction of the operating costs.
According to a senior Nasdaq executive, blockchain technology will be introduced to the company’s market for private companies, called Nasdaq Private Market. Any company using this platform will have access to a more convenient mechanism for tracking shares issued, and transactions can be settled almost instantaneously.
But there is even more good news for blockchain enthusiasts, as Nasdaq plans to develop a new application in Estonia based on this technology. The choice for Estonia is fairly straightforward, as the company owns the Tallinn Stock Exchange, which is Estonia’s only regulated secondary securities market. In addition, The Estonia Central Securities Depository is also owned by Nasdaq.
These soon-to-be-developed blockchain applications will be designed to improve registration for both companies and public pension, as well as the proxy voting process. A little-known fact is that the Estonian government contracts Nasdaq for this job specifically; it will be interesting to see how they plan to overcome these hurdles.
Estonia might be one of Europe’s smallest countries, but the local government keeps an open mind towards new technologies. Unlike most other European countries, Estonia sees the benefit of blockchain technology on a governmental level, and as the country is not very complex in size, developing solutions is slightly easier.
Why Shared Ledgers are Important to All of Us
Shared ledgers offer a multitude of different possibilities, all of which are aimed at making financial life easier and more convenient. Accounting, to give an example, is a very complex process with little to no transparency. Additionally, accounting suffers from having humans involved in the process, an element susceptible to corruption.
Another reason is that blockchain technology — which enables us to use shared ledgers in the first place — is nearly instantaneous. Sending money around the world over the blockchain takes a handful of seconds, rather than full days or weeks. The best part is that this can be achieved at little to no costs at all.
But the biggest reason shared ledgers matter is that they have no central point of failure. Since these ledgers are interlinked, the entire network would have to be taken down to destroy a protocol, rather than a handful of servers. Any blockchain-based network can have nodes all over the world, making it next to impossible for assailants to bring it down.
Nasdaq is among the first major finance companies to publicly embrace blockchain technology and develop projects with it for the financial markets. As we get closer to the release of these new applications, it will become much clearer as to how they work “under the hood.” These are exciting times to be involved in blockchain technology for sure.
What are your thoughts on Nasdaq bringing blockchain technology to Estonia? Do you think this is positive or negative? Let us know in the comments below!
Images courtesy of Nasdaq, Shutterstock, Hyperledger