NASDAQ Meets The Blockchain

And yes, it is THE blockchain. Not a different standalone implementation of blockchain technology.

When news broke late last night from WSJ writer (and previous Scottish Bitcoin Meetup guest) Michael Casey that NASDAQ, the second largest stock exchange in the US, already has 75 companies signed up in its NASDAQ Private Market to test blockchain technology to simplify handle pre-IPO trading, Twitter immediately lit up with conversation.

It soon became clear that their plan is to use the Open Assets Protocol – basically a Colored Coins implementation. If you haven’t heard of Colored Coins, it’s basically a way of connecting a ‘real world’ item with a tiny amount of Bitcoin. To exchange ownership of that ‘real world’ item, now you simply need to transfer that specific bitcoin. The benefits are clear and hugely powerful: a public record of verifiable ownership in which transfers are immediate, global and of an order of magnitude cheaper than most systems in which ownership is registered.

The reality is that this is huge news for Bitcoin and the scene in general. There’s a far wider narrative here (Bitcoin v blockchain etc) that I’m not going to touch on today. But if you think back a couple of years, this, a press release containing a quote like this really was unthinkable.

 “Utilizing the blockchain is a natural digital evolution for managing physical securities,” said Bob Greifeld, CEO, Nasdaq. “Once you cut the apron strings of need for the physical, the opportunities we can envision blockchain providing stand to benefit not only our clients, but the broader global capital markets.”

Within the securities industry, T+3 is standard – i.e. payment and certificates for trades in securities must change hands no later than three days after the date of the transaction. Now, with blockchain technology at work, the potential is there to go after that holy grail of T+0 or real-time transactions – a system that reduces both regulatory and counterparty risk significantly whilst also releasing funds that are otherwise tied up during those three days in the current settlement process.

Anything that increases transparency through a fully-digital service that simultaneously facilitates the issuance, transfer and management of private company shares whilst slashing existing inefficiencies and remaining impervious to bad actors sounds like a pretty compelling use case to me.

Yet another application that I and many others will be watching with huge interest.