Blockchain General Ledger Services

Co-authored by Travis Shank

As noted in our prior articles, Blockchain is a digital ledger maintained using cryptography, which means it allows entities to record and share transactions within a network. In order to add and verify entries to the ledger, all members in the chain must come to consensus for a new transaction to be valid. If all agree, then the transaction is added to the blockchain. The underlying technology for this functionality enables a host of transaction types, from voting to transferring property, to managing any kind of record.

At the highest-level, blockchains fall into two types: public and private. In public blockchain (sometimes called permissionless blockchain), the ledger is maintained by a consensus mechanism that is open to anyone. Transactions are publicly available for all to view. Bitcoin is the preeminent example of public blockchain. In permissioned or private blockchains, transactions are validated and processed by select individuals or organizations that form the consensus mechanism approving changes to the blockchain. Transactions may be made publically available for viewing or kept private to the members of the ledger.

How is Blockchain as a General Ledger a Game Changer?

Simply put, this new kind of digital ledger can be programmed to record virtually anything of value to humankind. From birth and death certificates, to deeds and titles of ownership, financial accounts to votes and taxes, any information can be expressed in code which previously could only be secure through physical storage or in private account silos.

Discussing blockchain’s potential, father-and-son team and blockchain entrepreneurs Don and Alex Tapscott note, “[blockchain] enables a reconciliation of digital records regarding just about everything in real time. Very soon, billions of smart things in the physical world will be sensing, responding, communicating, sharing important data, doing everything from protecting our environment to managing our health. This Internet of Everything needs a Ledger of Everything. Business, commerce, and the economy need a Digital Reckoning.” Why is this important? Increased trust and transparency will impact people from all walks of life by producing greater accountability and ownership for things society values. From consumers who want visibility into the manufacturing origins of their food products, to citizens who desire greater transparency and accountability from their elected leaders, blockchain as a general ledger allows for digital records to be visible to the general public for anything of value.

Examples of Blockchain as a General Ledger

Some big banks and governments are already implementing blockchains for this purpose. Their goals are commendable—increases in speed and security, reductions in cost and errors, and the elimination of central points for cyber-attacks. Banks including Santander, UniCredit, UBS, Reisebank, CIBC, ATP Financial and the National Bank of Abu Dhabi have all announced that they are working with San Francisco-based blockchain technology firm Ripple to explore blockchain technology as a distributed ledger for cross-border payments. The U.S. Financial Stability Oversight Council, which includes heads of the Federal Reserve and SEC, wrote in its annual report that distributed ledger systems could enhance market transparency and reduce risk exposure to third parties that would traditionally handle such transactions.

In the public sector, there are countless applications for blockchain. Take for instance Delaware, where 65% of the Fortune 500 companies are incorporated. The state recently announced the launch of two initiatives, the first of which focuses on transferring state archives to an open ledger. The second effort will allow companies that are incorporated in the state to manage all equity issuances and shareholder privileges on a blockchain. This new system is anticipated to operate faster and cheaper than the current process and increase Delaware’s competitive advantage as a go-to destination for businesses to incorporate.

Internationally, various countries are beginning to implement blockchain to support various government services. In Estonia, the government already uses blockchain to notarize marriages, births, and contracts. The UK Government is researching the application of blockchain to bookkeeping, grants management, and benefits administration.  Grants management can be a complex process with a high risk of illegal use of grant funds. Using a digital ledger to track and manage grant monies would help reduce that risk. A recent UK government report on the transformational potential of blockchain noted that, “…the eventual impact of DTLs [distributed ledger technologies] on British society may be as significant as foundational events such as the creation of Magna Carta.”

Possible Challenges and Opportunities for the Road Ahead

While blockchain presents a variety of opportunities and applications, there are still potential barriers that must be overcome in order for it to realize its full potential, including service-provider ecosystem vulnerabilities, adoption of supportive technologies, and uncertainty around future regulations.  In considering  the potentially benefits of using blockchain as a general ledger, public and private sector organizations will need to look at not only the transformation impact it could have on service delivery, but also the technological and regulatory implications involved.

Sources Cited For This Article:

Don Tapscott and Alex Tapscott, “Here’s Why Blockchains Will Change the World,” Fortune, 8 May 2016

Norton, Steven, “CIO Explainer: What is Blockchain?” The Wall Street Journal, 2 February 2016.

 Moyer, David, “More Banks are Trying Out Blockchains for Fund Transfers”, Fortune, 23 June 2016

Mougayar, William, “The Blockchain is Perfect for Government Services, but Where is Canada?” Huffington Post, 22 August 2016

Vigna, Paul, “Delaware Considers Using Blockchain Technology,” The Wall Street Journal, 1 May 2016