Distributed ledger technology has evolved significantly since 2009 when the first bitcoin was mined and the Bitcoin blockchain was created. Today, two notable public blockchains exist: Bitcoin and Ethereum.
However, neither of these blockchains target the problems specific to the financial services industry. Bitcoin was designed to facilitate the exchange of unstoppable, uncensorable digital cash, and Ethereum was designed as an unstoppable, uncensorable “world computer.” Neither of these goals are fully aligned with the requirements of the regulated financial services industry.
During the blockchain hype in 2013-15, banks and other financial institutions ran experiments, many of which used private “forks” or clones of Bitcoin and Ethereum software. They pointed the software inwards, creating private blockchain networks inaccessible from the outside world, rather than pointing outwards to the public databases.
Blockchains have given way to other distributed ledger technologies (DLT)
The goals of public blockchains are divergent from the goals of the regulated financial services industry.
Over time, these clones were adapted to try to meet institutional needs. However, it has become apparent that blockchains where transaction data is broadcast indiscriminately to all members of a network do not meet the needs of financial institutions.

One of the issues with a broadcast blockchain is the lack of privacy of the shared data. In Bitcoin and Ethereum, each computer on the network receives a record of every single transaction and update, and each computer validates these transactions according to a set of pre-programmed rules. The transactions contain details in clear, unencrypted text, including sending account, receiving account, amount, and any other details that are necessary for a computer to judge whether a transaction is valid. Intuitively, in an industry network, particularly financial services, it is not necessary or acceptable for all transactions to be revealed to all participants in real time.

However these experiments have created a new wave of enthusiasm for developing newer, more appropriate technology that helps to solve problems of cost, replication, risk, errors, and inefficiencies pervasive in the financial services industry.
The financial services industry consists of a network of parties who know each other, but each control their own books and records. They are not allowed to trust each other to maintain this, nor would they want to. Therefore, they individually record, process, and store data, then verify with each other that their versions of the numbers are correct.

Distributed ledgers can bridge the gap between these data silos to create a system of shared facts that evolve as commerce happens. These ledgers can be trusted to be accurate from the beginning, reconciling as they go, without the need for multiple reconciliation handshakes after every calculation, or becoming beholden to thirdparty golden sources that own and control the valuable data.
The financial services industry is ripe for DLT
The next generation of distributed ledgers is not blockchains. They are being designed and created to address the needs of regulated financial institutions. They are inspired by blockchains, but solve for the privacy and scalability needs of the industry.
The next generation of distributed ledgers
Distributed ledgers can be trusted to be accurate without the need for multiple reconciliation handshakes after every calculation.
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