| |OCTOBER 20219blockchain infrastructure. Governance organization also defines process on how to remediate issues when they occur and take corrective actions when unfortunate events such as Smart Contract bugs, leading to loss, occur. Even though blockchain technology has developed considerably in the last few years, its scalability is being questioned as much larger datasets need to be handled if any core part of the capital markets system has to be replaced. What steps can be taken to achieve scalability? There are several ways at looking at the much talked about scalability issues of Blockchain. First thing to do is not to draw reference to public blockchain solutions like Bitcoin and Ethereum where transactions rates per second are seven and 16 respectively. Public Blockchains use a 'Proof of Work' for consensus mechanism, though at the time of writing Ethereum is moving to Proof of Stake. Capitals markets will largely use private blockchain platforms which have enhanced consensus algorithms, limited nodes, and are primarily a network of known trusted parties. This enables better scalability or simply put higher TPS. Often, a comparison is made with the Visa processing thousands of transactions per second, and we've heard numbers like 24 K TPS or 56 K TPS making the rounds. The reality is, Visa produces an output 1700 TPS, but has server capacity that theoretically can achieve 56,000 TPS. In a benchmark study conducted a couple of years ago, it was found that enterprise blockchain platforms could support average daily trading volumes of US equity markets, 115 million trades for five continuous hours, in other words 6300 daily trades per sec (6300 TPS). Other scaling solution could include sharding, a partitioning technique used by Blockchain platforms for the purpose of scalability, enabling them to process more transactions per second. It helps reduce the latency of a network by splitting the blockchain network into separate shards. Besides this, there are layer-2 solutions that help execute smaller transactions off-chain and then pass consolidated single transaction on the main chain, again helping improve scalability. How fast do you see the adoption picking up pace? How should capital market players gear themselves up to gain technology maturity? At the moment it may be difficult to predict exactly when capital markets may transform to blockchain based platforms, but there is reason to believe that we are not far from that point. This is based on several positive events that have occurred in the recent past. For example, ASX's (Australian Securities Exchange) choice to replace CHESS with a blockchain based platform to help provide a broader range of benefits to a wider cross section of the market. Then, there is the Swiss Stock Exchange offering a secondary marketplace for buying and selling digital securities. Also, NASDAQ which is trying to help its clients move from traditional ways to using Blockchain technology, thereby enabling them to issue, trade and settle securities on blockchain based systems. There is a view of positive movement taking place towards a Blockchain enabled capital market infrastructure, and hence, we may soon be seeing systems running in production, of course they would need to have the blessing from regulators, and benefits to participants, members and investors. The Smart Contracts system ensures that the enforcement is automatic, making it possible to execute the terms without the need of an intermediary
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