Blockchain Shared Ledger Could Revolutionize Finance: Goldman

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Blockchain is not just about Bitcoin. Granted Blockchain is the public, shared ledger technology that makes the trading of Bitcoin possible and extremely secure, but electronic public ledgers such as Blockchain have thousands of possible applications beyond Bitcoin.

A December 2nd report from Goldman Sachs Equity Research titled Themes, Dreams and Flying Machines suggests that Blockchain could disrupt everything. Author Robert D. Boroujerdi argues that a digital platform that records and verifies transactions in a tamper- and revision-proof way that is shared by all will eventually even make central banks obsolete.

Blockchain takes out the middleman

Blockchain is a decentralized, cryptography-based record-keeping system that cuts out the middle man. Boroujerdi explains the potential: “It has the potential to redefine transactions and the back office of a multitude of different industries. From banking and payments to notaries to voting systems to vehicle registrations to wire fees to gun checks to academic records to trade settlement to cataloguing ownership of works of art, a distributed shared ledger has the potential to make interactions quicker, less-expensive and safer.”

When you remove the middle man, you dramatically reduce potential security concerns as well as speeding up old fashioned manual processes. Moreover, counterparty risk, if processing times improve, can be almost instantaneous, which means accurate, real-time, feedback on risks and exposures. Given ever increasing capital and regulatory costs today, any technology that increases ROI leads directly to higher profits. In many cases, this could lead to significant reductions in the need for supervisory and technology resources, and ultimately to notable cost savings.

Cryptography guarantees security of the process

Since Blockchain is based on cryptography, it is a highly secure process. Keep in mind that prior to any transaction being approved and added to the Blockchain, it is verified by an algorithm to verify its authenticity. Remember that each and every Bitcoin transaction is sent to the network for group trust and verification.

Of note, by solving the algorithms behind putting a block of transactions together, the “miners”, receive a reward of more Bitcoins. Boroujerdi notes that distributimg this data across multiple nodes in a network, is a complex, large-scale and extremely difficult process. That said, it is also highly reliable, as everyone has to agree to a transaction but no one owns it. Most importantly, it permits individuals who don’t know each other or trust each other to share an agreement that is validated, trusted and a matter of public record.

Blockchain could make central banks obsolete


Boroujerdi extends his argument to its logical conclusion: “This Blockchain allows information to be put in, but never deleted. This complete history … a “shared public ledger” that a network (and the currency) relies on, if you will – made, in the user’s mind, the role of a Central Bank obsolete (Exhibit 2).”

He goes on to argue that “The fiat of the currency, as a result, was born of the citizens of the internet, not a central clearing institution or agency.” Boroujerdi also points out that while the Blockchain of with Bitcoin is the most well known, there are a number of private and permission-driven shared ledgers gaining traction today.


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