ASX Jumps on the Blockchain Bandwagon


From the Australian Financial Review yesterday:

‘The ASX will move its equity markets settlement and clearing system onto blockchain-inspired technology being developed by a New York start-up run by Blythe Masters.

In an announcement that will be of significant interest to global exchanges and the technology industry, ASX said on Thursday morning it was comfortable replacing its ageing CHESS system with a new one using distributed ledger technology (DLT).’

So there you have it.

Blockchain technology is real. It’s not a mirage. It’s not a fad, as so many have suggested.

It’s simply a better technology, which is going to replace the old ways of doing things.

Here’s how ASX Managing Director, Dominic Stevens put it:

It will enable our customers to develop new services and reduce their costs, and it will put Australia at the forefront of innovation in financial markets.

In other words cheaper and better.

But also foundational.

What do I mean by that?

I mean that blockchain is so huge because it’s the base layer for a whole new level of innovation.

The analogy often given is the birth of the internet.

It took a while, but when it got going the speed and scale of the changes to businesses and everyday life was phenomenal.

The same is true of blockchain.

A lot of businesses out there today can be improved upon with blockchain technology.

And consequently a lot of jobs may become redundant because of it.

I’m not talking manual labour. I’m talking professional, well paid jobs. 

White collar workers under threat

Take accounting for instance.

In Australia it employs 118,595 people and generates revenues of over $20 billion per year.

A large function of this is auditing. That is cross checking facts and figures to make sure everything is above board.

Well, blockchain can do this function.

Faster, cheaper, and more reliably.

Now, this won’t happen overnight. But it will happen.

As more and more businesses — like the ASX — go onto blockchain solutions, the potential for cross checking expands rapidly.

There will be no need for a lot of manual audits.

The immutability of the blockchain means no one can cheat, and the figures can’t be hidden. All done at the speed of a computer memory chip.

Accountants aren’t the only ones in the firing line.

Lawyers are too.

You see, blockchains are capable of executing smart contracts. These are just automatic ways of transferring assets or goods when certain conditions are met.

In the future you may store your will on a blockchain.

When you pass on, the ‘births, deaths and marriages blockchain’ would automatically update your account on the smart contract. It would then distribute the assets automatically as per your will.

With the ASX moving to a blockchain solution this would actually not be that hard to do for shares, even today.

Blockchain will eat the world

I wrote a piece on 18 October with this title.

Back when bitcoin was a measly US$7,142. It’s above US$18,000 as I write this.

Here’s what I wrote then:

‘Just like the railways revolutionised the movement of people and goods, blockchain will revolutionise the movement of data.

Until now, any transfer of value required a middle man.

Someone to vouch for both the buyer and seller. To make sure the transaction was completed fairly.

Whether this was money, shares, land titles, registrations, vouchers, bonds, loans…pretty much anything of value.

The middle man stood there, and took their cut.

It was time consuming and costly for users. But it worked.

When bitcoin came along in 2009, people thought that it was just a new form of e-money. And it is. But like the recent Uber and Airbnb revolutions, it means more than that.

In fact, a comparison to Uber or Airbnb is pretty lame. Because the blockchain is a lot bigger and more interesting. And its effects will be a lot wider.

This one simple change — cutting out the middle man — opens up possibilities no one thought possible.’

With the ASX announcement today we have moved one step closer to this vision.

As more and more industries add blockchain to their business models, the value of the entire cryptocurrency industry grows exponentially.

Perhaps this accounts for some of the stunning growth in bitcoin today?

Whatever happens with crypto prices, it’s certain now that blockchain is here to stay.

Ryan Dinse,
Editor, Money Morning

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia