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AGF 2019 Events - October 24th, Radisson Blu Hotel, Johannesburg

AGF Forum: PE Fund Operations

The 2019 AGF Forum will assemble cutting-edge thinkers, management of leading Private Equity Firms (CFOs, COOs, CTOs), and Asset Managers to discuss the major developments that affect private investment fund operations.

8AM - 5PM

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AGF Service Providers Awards

The 4th edition of the prestigious Awards has opened for entries in the build up to the Awards night in Johannesburg, South Africa. Deadline for submissions: September 1st; judging period is from July 2018 to June 2019.

7PM - 11PM

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Opinion

Blockchain and the Investment Industry

Michael Kimondo, Head of Treasury Operations, Fusion Group
Jan. 18, 2018, 5:20 p.m.
790

Word count: 519

Blockchain refers to a distributed or decentralised public ledger or database of records of executed and shared digital events among participating parties. When persons transact in a blockchain system, a public record of all transactions is automatically generated and are visible to all participants which increase trust and reliability since participants can access the transactions from different nodes if one-point node fails. These transactions are verified by computers using sophisticated algorithms to confirm transfer of value and create a historical record of all activity which are impossible to change thus it contains an accurate and verifiable record of each and every transaction ever made which reduces opportunity for fraud.

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Blockchain refers to a distributed or decentralised public ledger or database of records of executed and shared digital events among participating parties. When persons transact in a blockchain system, a public record of all transactions is automatically generated and are visible to all participants which increase trust and reliability since participants can access the transactions from different nodes if one-point node fails. These transactions are verified by computers using sophisticated algorithms to confirm transfer of value and create a historical record of all activity which are impossible to change thus it contains an accurate and verifiable record of each and every transaction ever made which reduces opportunity for fraud.

The technology was originally devised to help traders trade in Bitcoin which is the best-known example of blockchain technology. However, the technology is not limited to cryptocurrencies, but has unlimited potential in application. Blockchain is hailed as a revolutionary technology and is claimed to have the potential to lower transaction charges, improve on efficiency and transform the investment business value chain. This technology is ushering in a new set of tools to cut costs and challenge the profit pool of the middle men with a promise to make centralised institutions obsolete.

Blockchain technology has the ability to create new financial connection through an automated payment system or an automated securities transfer by capturing and securing on the blockchain technology time, location, and electronic signature characteristics for each component of the new financial connection or relationship. Blockchain can have a deep impact on the settlement of securities transactions and afford huge opportunity to reduce the frictional costs of asset managers leading to reduced charges for investors.

The ability of blockchain distributed ledgers to replace intermediary centralised systems of record has attracted real interest in buy-side firms given the potential to cut cost, reduce delays, provide more timely and accurate data and enhance reporting accuracy. Firms will be able to very easily track chain of custody on asset transactions and easily allow verification of ownership of those assets that are moving.
In order to provide services to customers a value chain of activities that are performed in an investment firm, some activities within the chain processes are more suited to transition to a blockchain infrastructure than others. Transactions or processes that have multiple parties giving approval, strong audit, compliance, and regulatory oversight tend to be better suited for blockchain adoption.

Venture capital–backed Ripple Labs is using blockchain technology to reinvent the banking ecosystem and allow traditional financial institutions to conduct their own business more efficiently. Ripple’s payment network lets banks transfer funds and foreign exchange transactions directly between themselves without a third-party intermediary, as is now required. Regional banks can now move money bilaterally to other regional banks without having to relay those funds through an intermediary.

Blockchain is a sensational new technology with huge potential to disrupt and improve numerous industries. But it is not the answer to everything. Understanding which use cases you should pursue requires business understanding and technology knowledge, including your business strategy and process, the market you operate in, technology provider landscape and evolution of the technology.

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