Nasdaq: After three years of blockchain research, why do we think the technology has a brighter future?

As vice president of blockchain innovation at Nasdaq, Fredrik Voss is one of the most experienced executives working on blockchain technology, a technology that has the potential to revolutionize financial services and other industries.

A recent report by Bain & Company shows that 80% of financial market participants believe that this technology can transform their industry and expect their companies to adopt it by 2020.

Nasdaq is one of the few traditional financial services companies to have launched a blockchain product, Nasdaq Linq, a platform for private companies to manage their company shares. It has since been testing a blockchain-based electronic voting system in Estonia.

So based on his personal experience, what does Voss think of blockchain?

He said:

There is still a long way to go before this technology can be used in the capital markets, but it looks much more promising than it did three years ago.

On my recent show, Voss talked about what he’s learned about blockchain over the years, how Nasdaq evaluates a blockchain project, how the technology needs to evolve to go mainstream, and why he believes blockchain can provide a protective shield for regulators.

Voss said Nasdaq is interested in three main areas of blockchain application: post-trade exploration in capital markets, regulatory transparency, and managing relationships between asset issuers and asset investors.

(Frederick Voss, Vice President of Blockchain Innovation at Nasdaq)

Linq is the third application mentioned above, replacing the original paper certificate system, which is likely to become outdated or invalid due to certificate updates. Voss said that Linq is "more efficient, and its electronic process also makes mistakes less likely."

This blockchain electronic voting system can solve many problems. It can help participants to vote remotely, and shareholders can also vote by proxy.

If you own shares in a company, you can get the same number of tokens, and then you can transfer the tokens to others to vote on your behalf. We can use this system to see where the votes go, which can solve a lot of problems: suppose you are a voting agent, in the traditional process, it is difficult for us to know whether the agent follows the true wishes of the shareholders.

The company also launched a financial framework that allows users to connect different types of blockchain networks and traditional databases so that participants can easily launch a new model and achieve conversion between multiple networks.

Voss noted that Nasdaq “is a technology company that has been in the financial sector for more than 20 years… for us, the emergence of blockchain is like a normal weekday scene, not Christmas morning.” However, he believes:

Even if blockchain does not ultimately play its due role in the capital market, at least its arrival has triggered discussions about the architecture of the ecosystem, which is also a positive side. The arrival of blockchain forces market participants to communicate with each other, for example, are we satisfied with the existing post-trading process? Is the transparency we provide to regulators reasonable? ... This technology encourages the financial market to explore similar issues with a completely new perspective.

In addition, he said that recent technological innovations in the financial sector are all related to the front end, such as the transaction process, while blockchain focuses on upgrading the back end (post-transaction processing), that is, the process after the transaction is completed and used or after the cash and securities are transferred.

He also mentioned that blockchain technology can help Nasdaq communicate well with regulators. They "can provide regulators with a special node in the blockchain ledger network, so that regulators can view the operation process of the company on a larger scale with higher transparency."

This approach allows regulators to more quickly and carefully observe potential concentrated funding risks or systemic risks in a market or ecosystem.

Finally, Voss offered advice for companies planning to deploy blockchain technology in their products and services, including what they should do, what they shouldn’t do, what attitude they should have, and more.