NASDAQ and the blockchain


Yesterday, an announcement from NASDAQ put Bitcoin on the front pages of many financial news sites. No, Bitcoin is not going to be traded on NASDAQ. What’s happening is that NASDAQ Private Market is going to be utilizing “blockchain technology” to assist in their record keeping for shares of privately-held shares.

Many in the Bitcoin community are interpreting this as validation of Bitcoin itself, on the assumption that NASDAQ will be storing this transactional data on Bitcoin’s blockchain, but in my reading of their release, it doesn’t seem at all clear that they will be utilizing THE blockchain rather than rolling their own special purpose chain. That’s not stopping the community from jumping to conclusions, though.

Even if NASDAQ is rolling their own blockchain, that doesn’t make their announcement any less noteworthy, as it provides tremendous external validation about the technology that is at Bitcoin’s core, I just fear that people will start parading “facts” to use to entice others into Bitcoin which may not turn out to be true.

From NASDAQ’s release:

“Nasdaq today announced plans to leverage blockchain technology”

“Nasdaq will initially leverage the Open Assets Protocol, a colored coin innovation built upon the blockchain”

“Nasdaq’s blockchain technology will offer efficient, fully-electronic services that facilitate the issuance, transfer, and management of private company securities.”

“the creation of a securities distributed ledger function using blockchain technology will provide extensive integrity, audit ability, governance and transfer of ownership capabilities.”

“Nasdaq is one of the first multinational financial services companies to explore ways to leverage the blockchain in a non-currency manner.”

“Our initial application of Nasdaq’s blockchain technology-enabled offering will modernize, streamline …”

Reading that, to me, it sounds a lot more likely that NASDAQ will be rolling their own chain rather than adopting Bitcoin’s chain.

Another issue that keeps being mentioned on Reddit’s /r/Bitcoin is that NASDAQ’s adoption of the blockchain would do away with the need for attorneys to be involved in securities transactions. This also seems to be reading too much into the release.

What NASDAQ says is utilizing blockchain technology “will simplify the overwhelming challenges private companies face with manual ledger record-keeping.”

To my mind, that means that NASDAQ’s blockchain implementation will be used solely for keeping track of their customers (in this case, private companies) shares. If attorneys need to draft transfer agreements, voting agreements, or stock restrictions, none of that will go away simply because share ownership is tracked on a blockchain.

To summarize: NASDAQ Private Markets’ announcement provides tremendous validation of the blockchain concept. It does not make clear at all, however, that they are planning to utilize Bitcoin’s own blockchain, rather than creating their own special purpose blockchain. And regArdless of which chain they choose to implement their vision, the blockchains roll will be to keep track of private companies share ownership; it will not do away with the legal agreements necessary to transfer ownership of the shares of privately held companies.

So, let’s cheer NASDAQ’s announcement for what it is: validation of one of the core concepts that Satoshi Nakamoto developed and which Bitcoin depends on. But let’s not cheer the announcement for what isn’t confirmed, namely that they will be using the same blockchain that Bitcoin uses.

Now, if someone can provide a link where NASDAQ confirms they’ll be building off of Bitcoin’s actual blockchain, I’ll be all ears. But right now, I fear people are starting to make up “facts” where none so far exist.

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