29. February 2024 | Medienmitteilung
A new era: a brief history of blockchain technology in the financial world
Blockchain technology has swiftly earned a prominent role in the financial sector. This emerging method of data management has garnered the attention of key industry players, who have been rapidly developing specialised products and applications in the last few years. A notable achievement was the launch of the first structured product entirely managed on the Ethereum blockchain on 16 March 2018, in collaboration with the Chartered Investment platform Opus.
Further advancing the blockchain’s footprint in finance, Chartered Investment introduced e-Sec on 10 December 2021. This service provider specialises in maintaining crypto registers and serves as a pivotal technology provider for blockchain applications within the financial sector.
Distributed ledger technology (DLT) is the foundation for applying blockchain technology in the financial industry. This technology enables the recording of transactions in a decentralised manner. DLT is therefore different from the traditional, centrally managed ledger.
The concept involves documenting transactions in a standardised format within decentralised databases, which can then be accessed by authorised parties. Just like any other decentralised databases, synchronised versions of the classic accounting journal can be found in various storage locations.
When blockchain technology was first introduced in the cryptocurrency world, it caught the attention of major players in the financial industry. They quickly realised the potential of using blockchain as a tool for managing distributed ledgers. In 2016, the requirements for functional ledgers on the blockchain became more evident. This aims to document transactions between users in digital payment and business transactions, eliminating the need for a central authority to validate each transaction.
The process of legitimisation is accomplished through the utilisation of blockchain technology. This involves the creation of a new block or token that is derived from the transaction data and then added to the existing blockchain. With the current status easily accessible to all participants, thanks to cryptographic encryption, there is always a reliable ledger available.
Practicable procedures have been developed in practice, especially in the realm of cryptocurrencies like Bitcoin. These advancements have not only facilitated other applications in the financial industry, but have also made it possible to issue bonds on the blockchain.
A key development for blockchain technology in finance is likely the tokenisation of real-world assets. This process allows for the digital representation of requirements and processes associated with traditional financial products on the blockchain if digital tokens are given the same functionalities as their counterparts from the analogue world.
Smart contracts, which are already integral to blockchain tokens, make this achievement possible. Developers are focused on simplifying the creation of ever more complex smart contracts, with new tools and frameworks being created to assist in this effort.
Although the blockchain technology’s journey in the financial sector started only a few years ago, it has seen enormous advancements thanks to the efforts of its numerous pioneers. While there are still questions to be resolved and some countries are yet to establish a comprehensive legal framework, the significant impact of blockchain technology on the financial industry is undeniable.