Block chain technology, used in Bitcoin and other digital currencies, can be used in finance. It can be used in global payments, insurance claims, proxy voting and contingent convertible bonds.

As a technology, block chain combines cryptographic signatures with a distributed data base which is fault-tolerant. Here multiple parties can enter information ( for instance, money transfers or security trades ). This is done securely and with certainty that other participants too have the same information.

Distributed data bases and graphic signatures are with us since the 1970s. They both served different issues. They conjoined when a registry of asset ownership was envisaged, with no role or approval of the governing body for such ownership.

This shared registry of asset ownership is applied in clearing and settlement of trades. In such a system, the cash and assets go to their net owners. The difficulty is the distributed records across a whole array of institutions, each of the institution maintaining its own accounts in its own way.If these multiple players agree who owns what and who owes to whom, it is called reconciliation. It is a tedious time consuming process.

A block chain is basically a shared ledger. Each player contributes to it. Each player maintains an identical c0py of the ledger. The reconciliation is done by entering and verifying new information cryptographically. The reconciliation is automatic across all the copies. The consequence is everyone knows always who owns what. There is no need to check one another’s record.

Blockchain technology has not adopted by the markets. The problem is information sharing. Information vests with you a competitive advantage. Solution players can maintain their private records. The information sharing could be selective. Its basis is need-to-know, say while engaging in transactions. There is a third party uniqueness service to ensure truthfulness.

Each transaction has an attached code. The code is downloaded by the parties and they run it independently. This is just to verify the transaction. This reconciliation is faster than back-office work. We need a collaborative alliance through which multiple financial institutions can act together.