"Applications of the distributed ledger beyond
payment systems
The introduction of any new technology enables the
rethinking of business processes associated with the former
technology. In the case of payments, when paper ledgers were
first computerised, the underlying processes were not
significantly changed.
It is often the case that the bulk of the gains from the
introduction of a new technology do not arise immediately
because processes that make use of the technology also need
to be rethought. For example, Brynjolfsson and
McAfee (2014) observe that when the electric motor was first
introduced to factories, the productivity improvements it
enabled only emerged after a lag of 30 years. This was
approximately the time it took for a new cohort of factory
managers to emerge who realised that instead of merely
electrifying the single steam engine powering all the
machinery in a factory, small electric motors could be fitted to
each machine. While the initial installation did reduce costs,
the authors argue that the greatest gains came from factories
being rearranged according to the most efficient flow of
materials, rather than the limitations of the machinery. It was
not the electrification itself which produced the gains but the
changes in processes which it made possible.
In a similar way, the potential impact of the distributed ledger
may be much broader than on payment systems alone. The
majority of financial assets — such as loans, bonds, stocks and
derivatives — now exist only in electronic form, meaning that
the financial system itself is already simply a set of digital
records. These records are currently held in a tiered structure
(that is, with records of individuals’ accounts stored centrally
at their bank, and banks’ reserves accounts held centrally at
the central bank), but it may be possible in the future — in
theory, at least — for the existing infrastructure of the
financial system to be gradually replaced by a variety of
distributed systems (although this article makes no prediction
in this regard). Some developers have already implemented
so-called ‘coloured coins’ which means using digital currencies
as tokens for other assets by attaching additional information.
This development could allow any type of financial asset, for
example shares in a company, to be recorded on a distributed
ledger. Distributed ledger technology could also be applied to
physical assets where no centralised register exists, such as
gold or silver.(2)"
Very nice read.
Topic: The Bank of England is monitoring digital currencies (Read 4431 times)
