Asset Management on The Blockchain with host Sara Feenan of Clearmatics.
What Asset Management on The Blockchain offers is improved data security. Actually, DLT (Distributed Ledger Technology) does more than improve the privacy and security of data, it completely transforms how data is stored and accessed. In a manner unique to all conventional security methodologies, blockchain software offers not only security, but an immutable record of all transactions. By distributing records across multiple nodes, the odds of a data breach on a central database are eliminated.
Since DLT involves grouping transactions into blocks of data, encrypting the data blocks, and linking each data block to all those before it and all those to follow, data tampering becomes a near impossibility. In order to manipulate a financial record without detection, a hacker would have to simultaneously make the same change in all data blocks. Doing so would mean having access to all of the private and public keys, and access to all of the nodes comprising the blockchain. In a phrase, not going to happen.
Improved Speed
Not only is blockchain technology secure, it can be fast. A properly-designed asset management blockchain can provide near-real-time performance in asset tracking, giving managers quick insights into data drift and changes that can affect their clients’ portfolios. The distributed structure of DLT offers an exponential increase in speed for B2B transactions within the asset management industry.
Streamlining Portfolio Management
Portfolios built on blockchain technology benefit from the highly organized data structures DLT provides. Whatever protocols the industry ultimately adopts, DLT will accelerate communications between investors, asset managers, and third-party entities.
Clearance and Settling of Trades
Inefficiency in the current trading infrastructure limits clearance and settling of trades to two or three days. Since a completion of a blockchain transaction requires approval from all involved parties, DLT can eliminate the difference between a trade and the clearing of the transaction. This also eliminates counterparty risk, and improves capital availability.
Eventually, we could see blockchains replace Automated Clearinghouse (ACH) and Automated Customer Account transfer (ACAT) systems as the technology matures.
Smart Contracts
Last in our list, but likely #1 in terms of what makes DLT exciting for the financial sector, is the use of smart contracts.
Smart contracts are a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract that automate certain tasks. In asset management, those tasks can be anything from automatically triggering the sale of a fund, based on rules set by the client, to fulfilling the actual execution of a contract between the client and the asset manager. In short, smart contracts eliminate the need for attorneys in certain situations, while making contract and rule-based executions automatic and nearly instantaneous.
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