Nasdaq Inc. said it used blockchain technology to complete and record a private securities transaction for the first time, as the exchange operator seeks to pull ahead of a crowded sector that so far has offered more hype than reality.
Chain.com, a Nasdaq partner, became the first user of Nasdaq’s Linq blockchain when it issued shares to a private investor, the exchange company said Wednesday in a statement. Blockchain is the encrypted ledger that backs digital currencies like Bitcoin.
Blockchain became a sensation in 2015 with advocates’ promises to overhaul back-office systems used in mainstream finance, providing a way to complete transactions in minutes instead of days. So far, most companies involved have little in the way of demonstrable products.
Nasdaq is attempting to differentiate itself with its latest proof of concept. The New York-based company is also fulfilling a goal made by Chief Executive Officer Bob Greifeld in July to become the first major exchange operator to use blockchain technology.
“This successful transaction marks a major advance in the global financial sector and represents a seminal moment in the application of blockchain technology,” Greifeld said in the statement. “The implications for settlement and outdated administrative functions are profound.”
Now Nasdaq’s challenge is to show it can use its Linq blockchain technology on a bigger scale. The Chain.com issuance was a single transaction and the size of the deal wasn’t disclosed.
While Chain.com’s issuance was a private transaction, Nasdaq sees the technology as having potential for public markets. Doing so could reduce the time needed for clearing and settlement -- the processes that take place after trade execution -- to 10 minutes from three days. That would reduce counterparty risk and free up traders’ capital for other purposes.