Challenges and opportunities for ASX blockchain technology

Challenges and Opportunities for ASX Blockchain Technology
Photo: Worldspectrum, Pexels.

Since the latter months of 2017 and the start of 2018, there has been a lot of buzz around the inclusion of blockchain technology being introduced and rolled out to the Australian Securities Exchange (ASX).

ASX blockchain technology will seek to evolve the old model of investing by storing information across a network of computer systems under the umbrella of a single entity.

This is a move that is scheduled to begin in earnest around 2021-2022 and Australia is fortunate enough to be a world leader for a financial market within this scale.

Critics have voiced their concerns to point to various challenges, whilst others have championed the cause to identify what opportunities lie ahead with ASX blockchain technology.

The truth could be somewhere in the middle as we attempt to discuss what the future could hold with this upcoming roll out.

Moving away from proven CHESS model

Whilst the Clearing House Electronic Subregister System or CHESS for short has its critics, switching away from this model to ASX blockchain technology will see its fair share of challenges. Investors have enjoyed CHESS for what it has been able to offer, from providing standard holding statements to consolidating those holdings, has minimal administration concerns and the securities within this model are available to trade 24/7. Being able to consolidate holdings within a single account has been greatly beneficial by those individuals lucky enough to leverage this design, something that big banks have been promoting to their clients for years. Introducing a disruptive influence to that framework won’t be an entirely smooth transition despite the enthusiasm and new opportunities presented.

Single entity programming

One of the real benefits of ASX blockchain technology is that it is a program without a single entity owner. All parties in this setting will be relying on a synchronized version of the block records. Although it will be listed as a “private” enterprise, this is not to say that it will be an endeavour that is lacking in transparency. The network will be permissioned based, so any unique participant will be known and identified by their peers in the framework. Specialists that have been promoting the cause and arguing for a decentralised model will be championing this new format because it will be easier to reach what constitutes the truth without having to fight for a consensus based on dubious transactional data.

Australia being the global guinea pig

Even with 12 months of comprehensive testing that will take place before ASX blockchain technology takes flight by 2021-2022, it will still be a global first for any major financial market to bring aboard this innovation to scale. Despite many of the assurances that have been offered, there is a risk of unknown events and consequences resulting from a reduced cost of trading. With some corporate actions being automised as part of this innovation, it will take some time for the distributed ledger technology (DLT) to be entirely understood and even embraced by traditional stock traders and investors.

Security and stock protection

One of the core reasons why ASX blockchain technology is seen as an exciting development is the capacity to enhance security and protection measures. With literally trillions of dollars circulating between parties, there is always the risk that sensitive information can be compromised, either through nefarious black market means or simply through a lack of diligence and oversight by investors. This is a system where no one corrupting presence can violate the cryptography process, using modern tools like tracking software, automation and distribution. Unlike regular cash that can be duplicated for counterfeit purposes and used by hackers and black market players, every block is accounted for and no duplication is possible.

What do you think about it?