Market operator has spent millions experimenting with the technology behind Bitcoin
The Nasdaq stock exchange has used blockchain to transfer shares for the first time in what the US firm said was “a seminal moment” in the nascent technology.
Nasdaq said its Linq blockchain ledger had issued securities to an unnamed private investor, proving the concept of share trades through a decentralised ledger, and removing the need for a middleman such as a clearing house.
Blockchain, the database technology used to power the Bitcoin online currency, logs each transfer of an asset in an ecrypted “block” that is added to a permanent, transparent chain showing every deal associated with that asset.
While Bitcoin has oscillated wildly since its foundation in 2009, and its association with the online black market Silk Road has reinforced its reputation as the ungoverned frontier of the web, the way the currency transfers value between users has caught the attention of the world’s biggest firms, which are racing to find new applications for it .
The Bank of England has also created a blockchain team and in December invited students to pitch new uses for the technology, offering the prize of an internship with the bank.
“We believe this successful transaction marks a major advance in the global financial sector and represents a seminal moment in the application of blockchain technology,” said Bob Greifeld, chief executive of Nasdaq.
“Through this initial application of blockchain technology, we begin a process that could revolutionise the core of capital markets infrastructure systems. The implications for settlement and outdated administrative functions are profound.”
For banks, the attraction lies in the speed of transactions as several layers of verification can be stripped away in favour of transparency.
Instead of transactions all going through a central clearing house, then settling on both sides’ internal ledgers several days later, blockchain allows deals to be settled within minutes, with everyone in the network seeing and checking the trade on a “distributed ledger”.
The distributed ledger process is also being considered as a way to track organic food, diamonds and property, with ownership visible to all but encrypted in a bid to ensure that only legitimate sales are added to the chain.
Nasdaq, along with Visa, Capital One and Citi Ventures, committed to invest $30m in Chain.com earlier this year to explore uses for distributed ledgers in the architecture of financial transactions. Chain.com was the first client to use Nasdaq’s Linq platform.
A global blockchain consortium set up by the technology firm R3 has this month added five more banks, with 25 firms including JP Morgan and Citigroup already involved.
This article was written by Marion Dakers Financial services editor from The Daily Telegraph and was legally licensed through the NewsCred publisher network.