“The distributed ledger technology (DLT) models take out a point of control”, said one speaker during a panel at this year’s Depository Trust & Clearing Corporation (DTCC) forum in London.
The panellist, who featured on the ‘DLT: is the role of governance a misnomer?’ discussion, explained that: “The difference between DLT and traditional technologies, is that DL can enable truly distributed business models. If you think about what that provision is for, it actually allows us to develop, design, and put in place a fundamentally different financial market infrastructure.”
“The technologies and databases of today don’t allow us to do that because they are built around centralised models, and there has to be an administrator, whereas DLT takes out that point of control.”
The moderator asked the panel if they could foresee any issues relating to blockchain, and what the industry should be concerned about.
“There are lots,” one panellist replied. “There is a lot of regulation out there, it might be trade finance, it might be securities or land registry. There are lots of general factors around public data on a public chain, and so forth and how you manage that.”
“One of the factors that I am most focused on is the use of the blockchain database, and how it can effectively facilitate peer-to-peer transactions, settled directly between people without a lot of the current infrastructure in place, that you need to do that.”
Meanwhile, another panelist noted: “We [the industry] operate in a highly regulated environment and largely we do trust each other because we are operating in regulated environments, but where we don't trust each other is in our ability to execute what we have agreed to do in a coordinated fashion in the workflow repetition across a decentralised environment. We address that through reconciliation upon reconciliation across all of the different systems.”
The panellist continued: “In terms of moving to an environment where we are addressing all of these components, the governance piece complies with a centralised system so it doesn’t go away effectively.”
“Its importance is amplified because beforehand, there was a central operator platform, which ran centrally. There would be a standard model driving changes and direction, but with more ambitious decentralised models doing the running, then the focus is on running coordinated workflows with nodes.”
“How do you come to that decision through code? Why would you implement it? How do you address situations where there are bugs in the code and ensure that you all have to develop everything simultaneously, how do you develop more efficiently and then validate and distribute that code for common execution?”
The panellist added: “All of these components are absolutely essential and there is a much more efficient way of doing it in a trusted environment with no parties and that is having a central intermediary that is really focused on that, and it is not just about adding some friction back in, it’s about driving efficiencies through centralised processes that would otherwise need to be decentralised.”
