1. What is blockchain

Blockchain is designed for value-exchange

01. Value exchange in physical world

  • If Alice is to give Bob a $100 banknote in person, the banknote given out by Alice and the banknote received by Bob is the same piece of banknote
  • The physical property of an asset guarantee that if the $100 is transferred, Alice will have minus $100, while Bob plus $100

02. Value exchange in digital world

  • In the digital age, where the money in our accounts are simply digital numbers, we need a trusted third party to ensure we don’t simply type in whatever number we want in our account
  • Therefore we need banks, clearing houses, government etc. These are trusted establishments who verify, say, Alice really has $100 in her account
  • Transaction cost is high since it requires a lot of middle- and back- office processes and some 3-day period to clear payments

03. Value exchange with blockchain

  • In the era of blockchain, we all write on a common ledger, the copy of which is distributed across everyone on the network and maintained through cryptographic proof
  • Since the record is public, everyone can trace back when and where did Alice get her $100 to start with, and make sure she cannot spend the $100 again after paying Bob

The technology brings substantial benefits in terms of speed, security, transparency, convenience and cost. Well-suited for applications such as payments, financial asset transfers, smart contracts, ownership splits and notary services

2/3. Blockchain saves significant transaction cost

Benefiting the nature of a decentralized ledger, the technology being implemented in securities transactions can cut risk and produce significant savings of costs.