Blockchain is seen as a new digital revolution whose protocol has already been implemented. The main categories of use in the financial sector are Asset Transfer (currencies, shares, units in UCI funds*, bonds) and Registers Keeping (permanent and forgery-proof traceability of data thanks to the Blockchain’s redundancy). Knowing this, any underlying asset, even one that is undivided, can be encapsulated in a legal entity that can be fungible and therefore benefit from Blockchain’s value propositions.
*UCI: Undertakings for Collective Investment
Blockchain is defined as a database, storage, and value transmission technology. It is characterised by the transparency and security of the system.
This technology, therefore, has a major advantage: user confidence in the stored and transmitted data, but also in the multiple validation by the algorithms of the network nodes.
This technology initially allows a reduction in transaction costs, increased efficiency and faster execution of transactions: thanks to the Consensus algorithms, service functions can be emancipated, such as for example the legal departments which have a lot of administrative work to keep registers of securities movements up to date. Usually, the more people involved in the transaction, the longer the process takes. But decentralised blockchain trading speeds up the settlement time for secondary market transactions in securities; this is of interest to both issuers and investors. There is no longer a 5–12 year lock-up when investing in a private equity or venture capital fund.
Secondly, the blockchain allows for greater security and confidence in the data.
Finally, it improves liquidity, both on the primary market, through better management of the back office, and on the secondary market, through “smart-contracts” that allow for self-management of trades during the life of the security. This opportunity solves the problem of undervaluation and liquidity, all with perfect traceability.