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Blockchain's compliance potential

Jacqueline Niderost (jacquedn@gmail.com) is a strategic advisor for Gerson Lehrman Group in Phoenix, Arizona, USA. Tony Niderost (tony@niderost.org) is a technical adviser and subject matter expert to investment firms and is based in Scottsdale, Arizona, USA.

By now many people have heard of blockchain, but not everyone knows what it is, even though it is the big buzzword these days. It may seem complicated, and I’m sure the technical implementation details are. However, from a brass tacks perspective, rest assured it is not an insurmountable concept to grasp. In fact, think of it as nothing more than a transaction ledger that happens to be tamper-proof, with multiple copies that ensure the majority of others holding their copy of the ledger agree it is correct and the source of truth.

In case you lose your copy of the ledger, you can just grab one of the copies and make yourself another copy of your own. They are always all up to date with the right version. Additionally, there is no central intermediary, such as a bank in the case of monetary transactions. However, you do need a majority consensus of the participants to make a given transaction valid.

In reality, blockchain is simply a combination of several concepts that have existed for years, such as transparency, decentralization, distributed ledgers, and immutability.

One of the major uses of blockchain that has gained the attention of the public over the last several years is Bitcoin. In fact, Bitcoin would not exist without such a structure. Bitcoin is a cryptocurrency that can be traded, used for purchase, etc., in the way that other forms of currency can be used as well. And guess what? You need a ledger to track transactions and ensure they are transparent (everyone can see it who needs to), you can’t change recorded transactions (immutability), and you don’t want to depend on a central authority such as a bank or a broker (decentralized).

Although blockchain gained attention in the financial sector, use cases have started to expand to other verticals. Compliance is no exception. Compliance can use this technology to accelerate adoption of their programs while gaining efficiencies within their company.

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