Episode summary

The blockchain is a general term, like the Internet. A distributed ledger is a database that is distributed across several computers. In tradition systems there are various third parities that provide trust and validate ownership eg. custodians, banks, CSDs etc. These all add cost. A distributed ledger is irrefutable, what’s on the ledger is the truth. This provides a real-time audit trail and so reduces the need for third parties.

Centralised systems are subject to risks like hardware failures and hacks. Distributed ledgers are copied across many different systems so there isn’t any single point of failure. While distributed, it doesn’t mean its unbreakable. It's really the economic incentives that make it, not impossible but unlikely, to corrupt or crack. With multiple nodes it's simply harder to collude.

Blockchains will reduce the dependencies on centralised parties and democratise your data. No single company owns the blockchain, there are however companies offering services on top of different blockchains. Bitcoin miners for example, process transactions on the Bitcoin blockchain in return for fees. There are other companies that are also indexing the blockchain.

There is a big global opportunity to put capital market securities on blockchains. Competition here will likely come from global exchanges. This would allow local companies to raise money from a global investor base. Borders and exchange controls are somewhat in conflict with blockchains. However, local legal and regulation still needs to be followed.

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