Ignore the skeptics and naysayers. The ASX’s attempt to replace the aging Clearing House Electronic Sub-Register System – better known as CHESS – was the right move, despite ending up where it ended.
ASX has spent huge sums of money replacing CHESS with a complex mix of technologies, including a version of blockchain called distributed ledger technology (DLT).
Using a distributed ledger in this financial infrastructure would have been one of the largest non-governmental blockchain-based projects in the world. And admittedly, that was not a success.
But the reason why it failed has nothing to do with blockchain.
Part of the problem is that the technology isn’t widely understood, and to make matters worse, it’s regularly and repeatedly confused with “crypto” in the media. So much so that most people don’t know or even care about the difference.
Let’s face it: blockchain is not a cryptocurrency. It enables the existence of cryptocurrency, but has the potential to go well beyond bitcoin.
Likewise, reference is made to FTX, which is not a blockchain. It is a stock market that collapsed in November after a wave of cash withdrawals, failing corporate oversight and misuse of customer funds.
The CHESS replacement program was not a success because it was a groundbreaking project that tried to accomplish too much at once with what was then still a technology in the making.
As the public fallout continues, it is important to recognize that much of the good work around upgrading messaging protocols in the Australian stock market is highly valuable and will benefit the equity ecosystem.
It is integral that we do not throw the blockchain baby out with the bathwater. Not all blockchain platforms are created equal, and we need to look at all industries before nonsense and commenting on this architecture.
At Lygon, for example, we overhauled an outdated, 200-year-old paper-based system with many problems to improve the management, storage and updating of physical bank guarantees.
Of course, Lygon isn’t alone in using distributed ledgers to create efficiencies and benefits never before possible. It is widely recognized as the gold standard for secure multi-party transactions, title management, data transfer and contract management and audit.
From making transitions in energy supply and documenting emission allowances to protecting the intellectual property rights of music records and keeping individual health data safe – it is no longer seen as a solution in search of a problem.
Companies are proactively investing in the evolution of the distributed ledger landscape to adapt more quickly to changing market conditions and consumer needs.
In October, Samsung announced the launch of a security solution that uses the technology to protect Galaxy devices, TVs and home appliances, while Walmart, Carrefour, Unilever and Adidas already use blockchain-based technology to track their supply chains.
These examples show how distributed ledgers are used in many industries and locations around the world to share data securely over the network.
ASX has broken a lot of ground that will ultimately yield important lessons that will benefit the entire market in the future.
I commend the ambition of this project, and I hope it is an opportunity for further discussion and a better understanding of DLT rather than a deterrent to innovation.