Blockchain comes to Chile ...
The revolutionary Blockchain system (or chain of blocks), appeared in 2009 together with the virtual currency Bitcoin, reaches Chile no less than the Santiago Stock Exchange, and will be used to operate short stock transactions. It will be the first time that this technology is used for this type of transaction in Latin America and it would make the country a pioneer of this green technology in the world.
The Santiago Stock Exchange signed a strategic partnership agreement with IBM to incorporate this technology into short sales transactions in the local market. Built by IBM and the Santiago Stock Exchange of Chile, the solution is designed to help reduce errors, possible fraud and delay times for each transaction, it also improves transaction management and reduces costs.
"The Stock Exchange is a highly technological company, which provides the infrastructure and systems necessary to carry out transactions of all types of securities market instruments, the compensation and settlement of these, the provision of information services and the delivery of systems. management for intermediaries. Incorporating Blockchain in our business processes is in line with that purpose and puts us as a benchmark in the financial market, "said at the time the manager of Computing of the largest stock exchange in Chile, Andrés Araya.
The general manager of IBM Chile, Francisco Thiermann, highlighted the fact by stating that "our agreement with the Santiago Stock Exchange marks a before and after in terms of innovation in the stock market. The Bolsa is a pioneer in its field, and the adoption of Blockchain sets a transformational precedent in the financial markets industry not only in Chile, but in the region and in the world. "
What is the Blockchain system?
The Blockchain system is a huge database that works as a book sale and consists of a set of notes that are stored in a shared database so online, which are recorded using codes operations, quantities, dates and data of the participants. When using cryptographic keys and being in line with the multiple participants and their computers, it presents security advantages in the face of possible manipulations or frauds, because the modification in one of its copies would not be useful at all. It would have to adulterate the whole system, because the database is open and public.
All the blocks that make up the Blockchain system chain have a hash (numeric password) from the previous block and are sorted in chronological order. Due to the identification with the hash, all the blocks are referenced by the block that created them, so only the blocks that contain a valid hash are introduced in the chain and replicated to all the participating "mining" nodes. Thanks to this system it is practically impossible to modify a block that has remained in the chain for a certain time.
The mining nodes are responsible for creating the blocks that make up the chain, adding to each of them the corresponding hash and all the new transactions that have been introduced in the network. In this way we can say that the Blockchain allows us to keep a public accounting in a completely transparent way of all the transactions of the network, with almost no possibility of fraud, congestion, or loss of data. The process is developed in real time, which makes it totally traceable.
Billions of savings worldwide could generate adoption in the coming years of Blockchain technology by financial institutions, a trend in which Chile becomes a pioneer.
During 2016, in the Santiago Stock Exchange, USD23.645 million were traded in shares, an amount 8% higher than 2015. However, short sales only accounted for 0,07% of these, very far from the average of 30 % - 40% achieved in developed markets.
With this technology, it is expected to reverse the figure. It is estimated that currently the low penetration of this type of operations is due to the fact that intermediaries do not find it profitable to make short sales for small investors. But the use of the Blockchain could allow investors and intermediaries to reduce the closing times of transactions and save in back office, reducing their costs. Conducting short sales operations for smaller amounts could then be attractive, which would lead to broaden the base of actors in the market and increase the size of it.
Only in banking, it is estimated that Blockchain technology worldwide could generate savings of USD20 billion. Annually, the transaction costs that could be reduced with the new technology are between USD65 billion and USD80 billion.
Source: Martín Carrillo O. - Blueberries Consulting
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